Research Dept. News
|
|
|
|
Monthly Report, num 338 - September 2010
|
|
|
International review - Brazil
|
|
|
|
|
Brazil: easing back on the accelerator but not going down a gear
|
|
Brazil's facing the second half of 2010 with a moderate tone but is still growing more than its potential.
|
|
After the spectacular surge of the first quarter of 2010 and its surprisingly dynamic domestic demand, the Brazilian economy is facing a second half of the year marked by elections and a tone of moderation. Although most indicators continue to show signs of expansion, certain restraint can be seen and both the gradual removal of fiscal stimuli and the recent upturn in monetary policy will temper Brazil's economic progress over the coming months. Nonetheless, we still expect growth greater than its potential in the second half of the year and maintain our forecast of 7% for the overall figure for 2010.
|
|
Inflationary pressures take a breather while the real continues to pose a risk.
|
|
The fundamental reason is no other than the steadfast and continued strength of domestic demand, boosted by the robust job market and credit and persistently high confidence among Brazilian consumers in their country's economic development. In July, although gradually slowing up its rate of growth, industrial production continued upwards with a rise of 9.8% compared with the same month last year. Concerning demand, retail sales also surprised again with an extraordinary increase of 10.3% year-on-year in June.
|
|
|
|
Although, in the first half of the year, this same vigour led to the reappearance of inflationary pressures and fears of the risk of overheating, inflation dropped back to 4.6% in July, thanks largely to the decline in food prices. Nonetheless, and although economic growth is expected to be slower in the rest of the year, the firmness of domestic expenditure and the high installed production capacity utilization (82.7% in June) suggest inflationary pressures will appear again, so we expect at least another rise in the SELIC rate this year.
|
|
|
|
On the other hand, the upward trend in the reference rate increases the cost of the sterilization carried out by Brazil's central bank in order to slow up the renewed and persistent appreciation of the real. An appreciation with obvious, harmful effects on the foreign flank of demand, which continues to fall steadily. Fortunately, its huge domestic expenditure more than offsets this effect and continues to boost, single-handedly, the Amazon giant's economic progress... for the moment.
|
|
|
You can susbcribe now to be nofified by email every time the Monthly Report is updated in the internet.
|
All documents are in Adobe Acrobat format (PDF).
To view a document in PDF format you need the Adobe Acrobat Reader. If you don’t have it already loaded on your computer, you can donwload it now.
|
|
Direct link to the Research Dept. in your mobile
We'll send you a free SMS with the link
|
