Fixed Capital Investments – Further Decline

BRAZIL ECONOMICS - Report 07 Dec 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The worst news that came from the disclosure of the GDP data for the third quarter was the behavior of gross fixed capital formation. Measured at constant prices, the investment rate fell to 17.9% of GDP, below the level during the 2008 crisis (18.2%). In the monthly data, all GFCF components showed contraction, with the standouts being domestic production and imports of capital goods, in both cases 40% below the levels reached in 2013 (Graph 1). Civil construction held up slightly better in the quarter, but is also dropping steeply, mainly a result of weak demand for new real estate projects and tight credit (Graph 2), influenced by net withdrawals from savings accounts and cutbacks in the “My House, My Life” program.

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