The Brazilian economy returned to positive in the first quarter after a long recession, according to Central Bank data released on Monday, which have not yet indicated a linear or strong recovery. The Central Bank’s Economic Activity Index (IBC-Br), a type of indicator of Gross Domestic Product (GDP), grew by 1.12% from January to March over the last three months of 2016, in a seasonally adjusted result. In March, however, the index fell 0.44% from February, although it was better than the 0.95% decline projected in Reuters survey.
Analysts had already pointed out that the recent change in IBGE’s trade and service research methodology – which underpinned the behavior of the index – had clouded expectations.
“When we get the data from the quarter, the IBC-Br shows an inflection, but today we can not say what is the result of activity and what is the result of methodology,” said the chief economist of XP Investimentos, Zeina Latif.
“In general, what we see is that these data are in line with an economy that has stabilized. Now it is obvious that it has a certain insecurity because the thermometer is not very good,” she added, referring to the volatility of IBGE data . The negative result in March was in the wake of a widespread weakness in recent economic indicators released by the agency. In the month, the services sector fell 2.3% in February, worse result in five years and below that expected by analysts.
Retail, on the other hand, fell by 1.9% on the same basis of comparison, in the weakest monthly data in 14 years.
Meanwhile, industrial output plunged 1.8 percent over the previous month, weaker reading for March in the historical series started in 2002.
IBC-Br incorporates projections for production in the services, industry and agriculture sectors, as well as the impact of taxes on products.
Although he evaluated that the March data surprised positively, the chief economist of Bradesco, Fernando Barbosa, pointed out that he still came in the negative field and that the way forward will not be a strong economic recovery.
“This result, which reflects the declines in retail sales and the services sector released last week, reinforces our scenario that the resumption of the economy will be very gradual,” he wrote in a note. In the quarter, the positive result of the index was already expected by the market. In an unusual move, the Ministry of Planning even announced a 1.3% expectation for IBC-Br’s performance in the period.
Last week, Finance Minister Henrique Meirelles reaffirmed that GDP will grow in the first quarter, but also acknowledged that the effects of the recession still weigh on the country. In the last quarter of 2016, the Brazilian economy deepened the crisis and shrunk 0.9% over the third quarter, ending the year with a fall of 3.6%, according to IBGE data. By 2015, the decline in GDP had been 3.8%.
For this year, economists’ expectation according to the most recent Focus bulletin is a rise of 0.5% of GDP, similar to the official government estimate.
(By Marcela Ayres)