GDP monitor indicates the worst fall since the start of the pandemic in May, says FGV

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Economic activity in May was strongly influenced by the behavior of agriculture. agro, economy, gdp, agribusiness Rodolfo Buhrer/Reuters The economic activity in May in the country fell 3% compared to April, according to the reading of the GDP Monitor of the Getulio Vargas Foundation (FGV). It was the worst drop in this comparison compared to the previous month since April 2020 (-10.3%), said Juliana Trece, economist at the Nucleus of National Accounts at the foundation’s Brazilian Institute of Economics (FGV/Ibre). In practice, the withdrawal of the beneficial effect, on the economy, of the soybean harvest – which normally occurs in the first months of the year – led to an intense retraction, explained the technician. The projection signals an unfavorable result for GDP in the second quarter, says the expert. When detailing the trajectory of the indicator in May, the technician reiterated that the result was strongly influenced by the behavior of agriculture. This sector showed a drop of 17.9% in May compared to April, the strongest drop in the GDP Monitor series, which started in 2000. In comparison with May 2022, the retreat was 3%. This is because the effect of the record soy harvest expected for this year, which boosted the performance of the FGV indicator, and the official GDP calculated by the IBGE at the beginning of the year, was already accounted for in previous months, explained the economist. Now, it begins to be “removed” from the calculation of the results of economic activity, she added. “This recoil [do Monitor do PIB] scare. But despite that number scaring a lot, this ‘super fall’ came after months of strong growth [na economia]”, recalled Juliana Trece. She pondered that the impact of the “withdrawal” of the beneficial effect of agriculture driven by the record soybean harvest was already expected. In her understanding, there was an oscillation in the results of activity, in the short term, because of a specific sector. Thus, the very sharp fall in the GDP Monitor for May does not necessarily mean that the economy would be in a very bad situation in that month. “We can say that, in the first months of the year, it seemed that the economy was much better than it was because of soy, agriculture and livestock; and now it seems that the economy is much worse, also because of agriculture, ”she summarized. However, the specialist admitted that, even without the influence of agriculture, the GDP Monitor would have fallen in May, although not so intensely. Activities of weight in the economy, on the side of supply and demand, presented a decrease, in the indicator of the month, in different comparisons. On the demand side, household consumption fell 0.8% in May compared to April, as well as government consumption, with a decrease of 1.1%, in the same comparison. On the demand side, services, which represent almost 70% of GDP, fell 0.1% in May compared to April. However, the May scenario does not interfere with the annual projections for the Brazilian economy, in terms of technical understanding. The performance of the activity, driven by agriculture and livestock, was very good in the first quarter, which should end up balancing a scenario of greater retraction in the second quarter. In other comparisons, the FGV indicator showed positive rates. In the GDP Monitor, the economy grew 1.8% in May compared to May 2022 and, in the accumulated in 12 months until May, it rises 3%. “Even with what happened in May, I believe that, in the year, we are closer to a high [no PIB] 2% rather than 1% in 2023,” he said.

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