Brazil economy activity up in Nov, but slowest rise in 7 months

BRASILIA: Economic activity in Brazil rose in November for a seventh straight month, a central bank survey showed on Monday, slightly more than economists had expected although it was the smallest increase during that growth streak.

This suggests the solid recovery from the worst of the COVID-19 shock earlier last year continued to slow going into the fourth quarter.

The central bank's IBC-Br index, often seen as a good proxy for broader gross domestic product, rose a seasonally adjusted 0.59% in November from October, above the median 0.5% forecast in a Reuters poll of economists.

Activity in November was 0.9% lower than it was at the end of 2019, however, and 1.9% below its pre-pandemic level in February, both on a seasonally adjusted basis, the central bank figures show.

Alberto Ramos, head of Latin American research at Goldman Sachs, said he expects activity to continue rising, thanks to accommodative financial conditions, monetary stimulus, strong commodity prices and global growth.

"However, a deteriorating domestic COVID viral picture, rising inflation, a weak labor market, the moderation of disposable income growth with the reduction of the emergency fiscal transfers, and the deterioration of consumer confidence indicators should soften the pace of the recovery in the coming months," Ramos wrote in a note on Monday.

Compared with November 2019, activity was down 0.83%, and on an accumulated 12-month basis down 4.15%, both on a non-seasonally adjusted basis, the central bank said.

As the central bank chart below shows, Latin America's largest economy by this measure is still 7.6% smaller than it was at its peak in December 2013, on a seasonally adjusted basis.

Brazil's economy is expected to register its biggest-ever annual slump last year, with the government forecasting a 4.5% fall. Economy Minister Paulo Guedes believes it is in a strong "V-shaped" recovery and could grow by as much as 4% this year.