Employment and Indebtedness Frustrating Recovery of Credit

BRAZIL ECONOMICS - Report 25 Aug 2014 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

In an election year, the government is worried about the ongoing deceleration of the Brazilian economy. On August 28th, the IBGE will release the GDP figures for the second quarter of 2014, and besides possible contraction in relation to the first quarter, the numbers should show a sharp reduction in gross fixed capital formation and deceleration in household consumption. The indications given by the labor market on the possible path of consumption in the third quarter continue to reject the possibility of a significant recovery. The measures to stimulate credit announced last Friday are an attempt – with low efficacy in our opinion – to spur consumption.

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