Economic activity: Still no signs of acceleration

BRAZIL ECONOMICS - Report 14 Oct 2019 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

Absent of any fiscal impulse (on the contrary, the ongoing fiscal consolidation is having a contractionary effect); and global growth still decelerating; and uncertainties (domestic and international) inhibiting investments, the only source of aggregate demand impulse is expansion of household consumption. After some recovery in July, the indicators of commerce and services were disappointing in August, and our leading indicator points to a reduction of activity for the remainder of the year. Nevertheless, we have not reduced our forecast for GDP growth of 0.8% in 2019. The once and for all stimulus from FGTS and PIS/Pasep account withdrawals, which began in September, will give a boost to household consumption, and the tame inflation will allow the Central Bank to maintain the easing cycle, which will act as the only stimulus to the economy in 2019 and 2020.

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