By Gabriel Burin
A recent Multibagger poll predicts that Brazil's economy maintained solid growth in the last quarter compared to the first three months of the year, driven by household spending.
However, higher imports of goods and services may have dampened the country's growth, as they exceeded less dynamic exports at the beginning of 2024 due to a recent depreciation in the foreign exchange rate.
Analysts forecast that second-quarter gross domestic product figures, set to be released on Tuesday, will show a 0.9% expansion compared to the January-March period, when the economy grew by 0.8%.
Barclays economists believe that the Brazilian economy likely grew by 0.9% on the quarter and 2.7% annually, supported by strong private consumption driven by robust labor markets and increasing real wages.
While public spending contributed to growth through social benefit payments and aid related to floods, the external sector, with higher imports, may have dragged on growth.
Santander analysts reported a 7.8% quarterly increase in imports compared to a much lower 1.3% gain in exports. In the previous quarter, imports and exports saw growth of 6.5% and 0.2%, respectively.
From a supply perspective, total industrial production, including mining, is expected to have expanded by 1.2%, partially offset by a 2.4% contraction in the smaller farm sector according to Santander.
On an annual basis, economic growth is projected to be 2.7% in the second quarter, the highest since 3.5% in the same period of 2023.
J.P. Morgan economists anticipate that Brazil's growth will continue in the third quarter but may slow down in the future due to restrictive monetary and fiscal policies.
Recent signals from President Lula and the finance ministry suggest a potential rate hike and a commitment to fiscal restraint by year-end.
Overall, Brazil's economy is expected to grow close to 3% for the second consecutive year, outperforming other countries in the region.
Analysis:
This article discusses Brazil's economic performance in the second quarter of 2024, highlighting key factors such as household expenditure, imports, exports, and industrial production. The projected 0.9% growth in GDP indicates a positive trend, supported by private consumption and public spending. However, concerns about the impact of higher imports on growth and the potential for policy changes to affect future growth are also noted. Investors and individuals interested in Brazil's economy should monitor these developments to make informed financial decisions.