IBC-Br, GDP preview, surprised in February 2023

The Central Bank Economic Activity Index (IBC-Br), considered a kind of “GDP preview”, surprised in February. There was an increase of 3.32% over January, according to BC, in comparison with seasonal adjustment.

The index, released this Friday (28), was well above expectations. The median of projections collected by the ValorData service, for example, was 1.2%, with bets ranging from -0.15% to 2%. Resource manager Infinity Asset projected a high of 1.3%. Bradesco’s economic department, more optimistic, was betting on 2.6%.

In the seasonally adjusted series, the level of activity measured by the Central Bank in February was the highest since March 2014. It is worth mentioning that the indicator tends to undergo revisions in the following months. And, although it is treated as a preview of GDP, it uses its own and less comprehensive methodology.

Still according to BC, the activity index varied 2.76% over February 2022; 2.87% in the first two months, compared to the same period last year; and 3.08% in the accumulated 12 months.

The IBC-Br data is in line with positive indicators for the first months of the year released in recent days, such as the good performance of the service sector and the formal job market.

In March, according to the Ministry of Labor, the country generated just over 195,000 jobs with a formal contract, twice the median of expectations. On the other hand, the IBGE Continuous Pnad survey, which calculates the performance of all types of occupation, including informal ones, pointed to a drop in the total number of employed persons and an increase in unemployment.

Bradesco cites “short-term surprises” to raise GDP projection

This Friday, Bradesco said it had raised its projection for economic growth in 2023 from 1.5% to 1.8%. A report from the bank’s economic department attributed the revision to “short-term surprises”.

“The activity data for January and February surprised on the upside, suggesting that consumption was still high at the beginning of the year. The labor market remains heated, with consequent support for the mass of earnings, boosting retail sales and services. At the same time, the agricultural GDP should be even stronger than previously predicted”, says the text.

On Thursday (27), XP Investimentos reported that its “tracker” for GDP growth in the first quarter rose from 0.8% to 0.95%, compared to the last quarter of 2022. “Our estimate for GDP growth in 2023, currently at 1%, is skewed slightly upwards,” the brokerage reported.

The good news in the field of activity, however, has a side effect. For many economists, they can keep inflation more resistant, thus making it difficult for a fall in the basic interest rate (Selic).

Despite this, economists at Bradesco say that the exchange rate – lower than previously projected – may offset the effect of economic activity on inflation. “In addition to the estimated exchange rate reduction, the more favorable scenario for agricultural commodities led us to project a more intense deceleration in food inflation”, they said.

The bank predicts that inflation measured by the IPCA will be 6.2% in 2023 and 4% in 2024 – the median market expectations for these indices are 6.04 and 4.18%, respectively.