BRASILIA, Sept 1 (Reuters) – Brazil’s economy picked up more than expected in the second quarter, as a boost in consumer spending offered a tailwind for President Jair Bolsonaro’s re-election campaign.
The country’s gross domestic product (GDP) expanded 1.2% in the three months to June, official statistics agency IBGE said, above the 0.9% growth forecast of economists in a Reuters poll.
It was the fourth straight quarter of sequential growth, lifting economic activity 3% above its pre-pandemic level and prompting several banks to raise their 2022 growth forecasts.
An improving economy has revived the election hopes of Bolsonaro, who trails former President Luiz Inácio Lula da Silva in opinion polls but has lifted his popularity with an expanded welfare program and short-term tax measures to curb inflation. read more
Second-quarter GDP was bolstered by 1.3% growth in the dominant services sector, along with a 2.2% gain for industry and a 0.5% expansion for agriculture. On the demand side, investment jumped 4.8% and consumer spending rose 2.6%, while government expenditure declined 0.9%.
Brazil’s jobless rate dropped to 9.1% in the quarter through July, the lowest in nearly seven years.
Thursday’s GDP data led to a wave of upward revisions for growth this year. Bank of America now forecasts 3.25% expansion, up from 2.5% before. Goldman Sachs raised its 2022 growth forecast to 2.9% from 2.2% previously.
William Jackson, chief emerging markets economist at Capital Economics, improved his outlook for this year to 2.5% growth from 2%, but stressed that “the economy is likely to soften over the second half of the year”.
Brazil’s central bank has pushed interest rates to 13.75% from a record low of 2% in March 2021 in an effort to battle high inflation. But the brunt of that tightening may not be felt until the October election has passed.
Rogerio Boueri, head of the Economic Studies Advisory at the Economy Ministry, played down the impact of higher rates on activity this year. He suggested the official 2% growth forecast for 2022 is “dated,” as carry-over effects alone now point to a 2.4% expansion.
Activity in the second quarter grew 3.2% from the same period of 2021, beating a 2.8% forecast in the Reuters poll.
IBGE also revised first-quarter growth to a 1.1% expansion from the end of 2020, from 1.0% growth reported previously.