What is the Current Stage of the Economic Cycle?

BRAZIL ECONOMICS - Report 08 May 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

When the economy enters a steep recession, like in 2015, all the indicators decline at the same time, but when the GDP ceases to decline, some sectors and products start growing again while others only show stability or even continuing contraction. All signs are that the cycle of shrinking GDP has reached its end, but recovery has not yet begun. Although industrial production grew by 0.7% in the first quarter, contributing (along with agriculture) to an increase of aggregate GDP in the quarter, this contribution from industry was almost totally due to the positive carry-over from output in December 2016. The only force that can put industrial GDP on a consistently upward path is continuing reduction of the interest rate.

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