Photo: Brazilian economy
Brazil’s central bank said its economic activity index, a leading indicator for gross domestic product performance, declined by 1.2 percent in the second quarter relative to the previous three-month period.
The monetary authority’s index, known as the IBC-Br, fell in June for the second consecutive month.
After declining by 0.18 percent in May, it dropped 1.48 percent in June, the worst performance for that indicator relative to the previous month since May 2013, when it contracted by 1.68 percent compared to April of that year.
Other indicators had earlier shown a drop in production in June, with industrial output adversely affected by the numerous public holidays declared in different cities during the World Cup, held in Brazil from June 12 to July 13.
Prior to that sporting event, Brazil’s economy had been hard hit by higher inflation, which reduced households’ purchasing power and forced the central bank to raise its benchmark interest rate to 11 percent, its highest level in 2 1/2 years.
Brazil’s economy grew a paltry 0.13 percent in the first half of the year relative to the same six-month period of 2013.
The Brazilian Institute of Geography and Statistics, or IBGE, is scheduled to release its final estimate for second-quarter GDP on Aug. 29.
The IBC-Br reading confirmed the Brazilian economy’s downward trend.
It also reinforces the pessimism of private economists, who have cut their growth forecast for 11 consecutive weeks and are currently projecting that Brazil’s GDP will expand by 0.81 percent this year.
The government is sticking to a more optimistic forecast of 2 percent growth, while the central bank recently lowered its forecast to 1.6 percent growth.
After expanding 7.5 percent in 2010, the Brazilian economy has struggled in recent years, growing 2.7 percent in 2011 and just 1 percent in 2012 before posting a slight recovery with 2.3 percent growth last year.