As the National Statistical Office announced today, the Brazilian economy recorded seasonally adjusted quarterly growth of 0.5% in the third quarter 2010. In the wake of an increase in real gross domestic product of more than 11% overall in the preceding five quarters (second quarter 2009 to second quarter 2010), this latest development was by no means surprising. In view of growing evidence of overheating, such as an appreciable pickup in inflation (November: +5.6% on a year earlier), the let-up in growth momentum is essentially to be welcomed. While private consumption grew somewhat more strongly than in the second quarter, the increase in investment eased. No impetus came from government consumption, which was flat. However, the key factor behind lower GDP growth was on the foreign trade front: Although exports managed to increase by almost 2½% on the preceding quarter despite the strength of the Brazilian real, this was more than offset by the almost 15% jump in imports. On balance, therefore, foreign trade made a negative contribution to growth.
Brazil: Economy takes a breather
Growth momentum looks set to be subdued in the current quarter as well. Although the November purchasing managers’ index for the manufacturing sector edged up slightly on the previous month, at 49.9 it is still a whisker below the 50-point expansion threshold. Industry is currently providing little thrust: thanks to a marginal increase in October, industrial production is now a mere 0.4% up on its average third quarter level. However, following the sizzling performance in some quarters up until the summer, Brazil is still on course to notch up real economic growth of around 7.5% this year despite the current breather.