Neither Fish nor Fowl

BRAZIL ECONOMICS - Report 22 Jul 2024 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

The impact of floods in the southern part of the country on economic activity was apparently lower than expected, indicating a less pronounced slowdown in the second quarter. However, we note that in the regional monthly services survey (PMS), the estimate for services volume in Rio Grande do Sul was probably distorted by problems with inflation data, implying an unreasonable increase in official data, while our alternative calculations suggest a declined close to 12.8%. Our expectation for activity in Brazil this year is that demand will remain heated due to fiscal stimuli and income growth, while production will remain limited by a full-employment economy.

ACTIVITY SURPRISES - IBC-Br and GDP Monitor point to growth of around 0.3% in May (Graph 1), when the effects of the flood in Rio Grande do Sul were more intense. As a result, the carry-over for the second quarter in these indices is 0.4% and 0.3%, respectively, with a smaller-than-expected impact on the country's economic activity. Retail (PMC), services (PMS), and industry (PIM) data were at least 0.5 percentage points above the expectations obtained from the Bloomberg survey.

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