Brazil’s economic activity slows in September, signaling recession
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SAO PAULO – Brazilian economic activity contracted in the third quarter, a central bank indicator showed on Tuesday, signaling a possible recession for Latin America’s largest economy.
The IBC-Br economic activity index, a leading indicator of gross domestic product (GDP), fell 0.27% in September from the previous month, roughly in line with a drop of 0.30% predicted in a Reuters poll of economists.
The central bank also revised down its data for August, showing a drop of 0.29% instead of a previously announced 0.15% drop.
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The numbers added to growing economic concerns in Brazil, where the recovery from a COVID-19 slowdown has stalled, with unemployment and 12-month inflation now stuck at double digits.
As the central bank aggressively raises interest rates to contain inflation, some economists are warning of a further slowdown next year. Tuesday’s data suggests that Brazil may have already met the technical definition of a recession: two consecutive quarters of economic contraction.
The IBC-Br posted a decline in economic activity of 0.14% in the third quarter after falling 0.1% in the second quarter.
The government statistics agency IBGE releases official third quarter GDP data on December 2.
A central bank survey released on Tuesday showed economists lowered growth expectations for 2021 to 4.88% from 4.93% a week earlier, while reducing their outlook for 2022 to 0.93% from 1 , 00%.
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In comments to a banking association on Tuesday, Fernanda Guardado, director of international affairs at the central bank, dismissed fears of stagflation in Brazil, calling 2022 a year of slower growth but not a recession.
Guardado said the bank considers it “very difficult” for the economy to contract next year as “a lot of people” are now predicting.
Still, central bank chief Roberto Campos Neto said the deteriorating outlook for inflation had given policymakers a difficult task.
“It is important to be realistic and understand how widespread inflation is and how difficult the job of the central bank will be,” he said during a speech at a legal seminar in Lisbon. (Reporting by Camila Moreira; writing by Carolina Mandl; editing by Brad Haynes and Steve Orlofsky)
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