Economy brakes and GDP grows 0.9% in the second quarter

The GDP in the second quarter grew 0.9% in relation to the first three months of the year, according to data released this Friday (1st) by the Brazilian Institute of Geography and Statistics (IBGE). It is a loss of pace compared to the beginning of the year, when economic activity advanced 1.8% compared to the last three months of 2022.

Compared to the same quarter of 2022, GDP grew by 3.4%. In the accumulated of the four quarters ended in June 2023, GDP grew by 3.2%, compared to the immediately previous four quarters. In the first half, the accumulated increase was 3.7%.

Industry drives growth across sectors

Who drove the growth was the industry, with an expansion of 0.9%, followed by services (0.6%). After strong growth in the first half, agriculture fell by 0.9%.

The growth in industry is due to the positive performances of 1.8% in extractive industries, 0.7% in construction, 0.4% in electricity and gas, water, sewage, waste management activities and 0.3% in in the processing industries.

In services, the positive results were from: financial activities, insurance and related services (1.3%), other service activities (1.3%), transport, storage and mail (0.9%), information and communication (0.7%), real estate activities (0.5%), administration, defense, public health and education and social security (0.4%) and commerce (0.1%).

Consumption leads expansion on the expenditure side

From the perspective of expenditure, household consumption (0.9%) and government consumption expenditure (0.7%) grew, while gross fixed capital formation, which measures investments, (0.1%) remained stable in relation to the immediately previous quarter.

In the external sector, exports of goods and services grew by 2.9% and imports of goods and services rose by 4.5% compared to the first quarter of 2023.

More evident moderation, but economy shows resilience

According to economist Rafael Perez, from Suno Research, after the effects of the strong growth in agriculture, in addition to the high base of comparison in the first quarter, a moderation in economic expansion is already starting to become more evident.

“However, the data in the second quarter showed a much more resilient Brazilian economy than expected, mainly due to the services sector, household consumption, industry and government spending”, says the economist.

The chief economist at Monte Bravo Investimentos, Luciano Costa, points out that a new wave of revisions of growth expectations for the Brazilian economy should come in the next few days. “It goes to somewhere between 2.5% and 3%,” he says.

Government expectations

The Ministry of Planning points out that the strong growth in the first half shows that, even if there is no increase in activity in the months of the second quarter, the Brazilian GDP will grow 3%, surpassing the current market projection, which is at 2.3% .

The Secretariat for Economic Policy (SPE) assesses that the performance in the first half gives a positive bias to the growth estimate for the year. Currently, it is 2.5%.

The expectation is for a slowdown in the pace of growth in the third quarter, followed by a slight recovery in the last quarter of the year.

“The trends of deceleration in service activity and retraction of the manufacturing industry, already observed since mid-2022 in the interannual comparison, should continue until the end of the year. This dynamic reflects, on the demand side, the retraction of investments”, highlights the SPE.

According to the secretariat, a series of factors explain the expectation of a slower pace of growth:

• The lagged impacts of monetary policy on activity, due to financial conditions that are still restrictive,
• The smaller impulse coming from abroad, due to the slowdown of the world economy, and
• The slowdown in the creation of new jobs.

On the other hand, the SPE considers that there are aspects that favor growth:

• The effect of reduced food inflation on disposable income,
• Delinquency reduction due to the Desenrolla program,
• The best conditions in the credit market with the start of interest rate cuts,
• The advance in the real income mass due to low unemployment, and
• The significant improvement in the confidence indices for services, commerce and consumers in July and August.