Brazil: Up, up but not yet away

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Brazil’s economy is growing.

After a 2 year recession, it’s about time the South American nation got back on its feet.

Spending

Lower interest and inflation rates pushed household spending up for the first time since 2015.

Bank of America Merrill Lynch thinks that Brazil’s growth rate will double next year. And domestic companies tied into the Brazilian service sector will really make a comeback. That could be down to the economic recovery being increasingly felt by consumers. And they will not only have more money to spend but the confidence to do so.

Government

Meanwhile, government spending was down, caused by recent caps and labour reform.

However, so too was corporate investment. Although, this is anticipated to pick up.

Not out of the woods

Whilst this quarter’s results allowed ratings agency S&P to take Brazil off its “CreditWatch” list, it could still downgrade the country’s debt, making it more expensive for the government to borrow. That’s because Brazil’s debt pile (debt to GDP ratio is around 50%) is only getting bigger. And the country’s legislature, Congress, hasn’t made enough progress on tackling the deficit.

And retail still needs a kick

Whilst Brazilian retailers saw sales up almost 4% compared to this time last year, an expected monthly rise from June didn’t happen. This a key sector because almost 60% of Brazil’s GDP is supported by consumer spending.

 

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