World Economy

Brazil August Growth Lowest in Five months

Brazil August Growth Lowest in Five monthsBrazil August Growth Lowest in Five months

Economic activity in Brazil contracted in August at the fastest pace in five months, suggesting a less stable economic recovery than previously anticipated.

Activity fell 0.38% after seasonal adjustments, central bank data showed, following a downwardly revised 0.36% increase the month before. The median forecast in a Reuters poll indicated a 0.15% monthly contraction in August.

The readings indicate that a government measure authorizing workers to withdraw early from a severance fund that expired in July may have accounted for a substantial share of the recent pickup in consumer spending, which had driven several forecasters to revise up their gross domestic product estimates.

Still, economists point to signs that the outlook for a gradual economic recovery remains intact. Low interest rates are having an effect on Latin America’s largest economy, they said, with sales of products closely connected to credit on the rise.

Sluggish growth should do little to lift inflation from the slowest in 18 years, allowing the central bank to continue cutting rates to an all-time low.

The Brazilian economy is expected to grow 0.72% in 2017 and then accelerate to 2.50% in 2018, according to a weekly central bank survey of economists.

As Brazil’s economy improves, the competition for high quality job candidates is getting more fierce.

Brazil has the fifth largest market for recruiting in the world—behind the US, China, Japan and the UK, according to the World Employment Confederation.

Meanwhile, according to data provided by Markit Economics, the final Markit Brazil ManufacturingPurchasing Managers’ Index stood at 50.9 in September 2017. It remained unchanged compared to August 2017. It didn’t beat the initial estimate of 51.2.

The performance of Brazil’s manufacturing PMI in September was mainly due to the following:

- Production volume and output rose at a stronger rate

- New business orders and export orders showed some improvement

- Job growth in the manufacturing sector and outstanding businesses fell.

The iShares MSCI Brazil Capped, which tracks the performance of Brazil, rose 4.2% in September 2017. The Direxion Daily MSCI Brazil Bull 3X ETF rose 12.0% in September 2017.

The Brazilian economy has faced a series of problems in past years. Rising inflation, unemployment, and contraction in economic growth largely hampered investor sentiment for the economy. Now, falling employment is again increasing concerns. Brazil is one of the important economies in Latin America. Stabilization in commodity prices is supporting various major economies there.

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