As the National Statistical Office announced today, the Brazilian economy grew by a seasonally adjusted 0.8% quarter-on-quarter in the second quarter of 2011, well down on the revised figure of 1.2% seen in the first three months of the year. A marked boost came above all from investment which was up 1.7%. But private and government consumption also made a positive contribution to growth, with both rising by a good 1%. Exports rose by over 2%. With the in-crease in imports actually topping 10%, overall net exports were negative.
An acceleration in growth in the second half of the year does not look to be on the cards. On the contrary: There is much to suggest that the Brazilian econ-omy is currently losing further momentum. Although industrial production in July climbed by a seasonally adjusted 0.5% on the preceding month, it is likely to stagnate in the coming months. In August the purchasing managers’ index for the manufacturing sector slipped by 1.8 points to 46 points and is now well below the expansion threshold of 50 points. Figures over 50 signal expansion in economic activity, below 50 a decline. The recent decision by the Brazilian central bank to lower its key rate by 50 basis points to 12% is striking. It is evi-dently more concerned about economic growth than about inflation, even though consumer prices in July stood 6.9% up on a year earlier and thus above the central bank’s inflation target of 4.5% plus/minus 2 percentage points.
The Brazilian economy is likely to see quarterly growth in the region of 0.5% in both the third and fourth quarters of 2011. Against this backdrop and given the revision to the growth rates in the preceding quarters, we have trimmed our full-year growth forecast from 4% to 3.4%.