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Brazil’s economy shrinks more than economists forecast

Jul 14 2016 18:30
Matthew Malinowski

Brasilia - Brazil’s economy contracted more than analysts expected in May as policy makers grapple with the worst recession in decades.

The central bank said its economic activity index, a proxy for gross domestic product, fell 0.51% in May from the previous month in seasonally-adjusted terms, following a revised 0.07% increase in April. The median estimate from 30 economists surveyed by Bloomberg was for a 0.2% contraction.

Acting President Michel Temer took office in May pledging to revive confidence and pull Brazil out of a recession that is extending into its second year. His administration is promoting measures in Congress that would shore up fiscal accounts and attract foreign investment to industries such as airlines and oil extraction.

Brazil’s business and consumer confidence have recently rebounded and economists surveyed by the central bank expect GDP to expand in 2017.

Still, there are signs that the return to growth may take longer than expected. Retail sales in May unexpectedly plunged the most on record for the month amid a drop in demand for personal and household goods as well as pharmaceuticals and cosmetics. Brazil’s non-seasonally adjusted economic activity index fell 4.92% from a year ago, compared with a median estimate of a 4.2% drop.

brazil  |  economy
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