UPDATE 3-Brazil's Rousseff loses voter support on economic woes

Fri Jun 6, 2014 5:24pm EDT

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(Adds remarks by former president Luiz Inacio Lula da Silva in paragraphs 9-10)

By Anthony Boadle

BRASILIA, June 6 (Reuters) - President Dilma Rousseff has lost ground among voters on worries about Brazil's faltering economy ahead of the Oct. 5 election, which will likely go to a tighter second-round vote, according to a poll published on Friday.

Rousseff is still the favorite to win re-election, but support for the left-leaning president has dropped to 34 percent, from 37 percent in a poll last month, and 10 percentage points since February, polling firm Datafolha said.

The poll helped propel Brazil's benchmark Bovespa stock index to its biggest gain in over a month, of over 2.6 percent, as shares of state-run firms rallied. Investors in those companies, which include oil producer Petroleo Brasileiro SA, known as Petrobras, hope a new administration will enact policies more favorable to business interests.

Rousseff still has a large - though shrinking - lead over her closest rival, AĆ©cio Neves of the centrist Brazilian Social Democracy Party. In the poll, Neves slipped one percentage point to 19 percent.

Behind him was Eduardo Campos, the Brazilian Socialist Party candidate, whose share of voting preferences fell to 7 percent from 11 percent in May.

Rousseff must win at least 50 percent plus one of the valid votes cast on Oct. 5 or the election will go to a run-off. Her lead over Neves in a second-round vote has shrunk to 8 percentage points from 11 points in May.

Pessimism about the economy is focused on concern inflation will rise and employment will fall, the poll showed.

Thirty-five percent of voters say they will never vote for Rousseff (up from 31 percent a month ago), while Neves' negatives have come down.

In a sign of rising concern in the governing party, former president Luiz Inacio Lula da Silva, Rousseff's political mentor, challenged one of her senior economic officials during an event in southern city of Porto Alegre.

"One day you will have to explain to me why, if we don't have demand-driven inflation, why we are curbing credit," he told Treasury Secretary Arno Augustin, according to O Globo newspaper. "Without credit nobody is going anywhere."

Protests expected during the soccer World Cup that kicks off next week in Brazil could further dent Rousseff's popularity and complicate her re-election bid.

The once-booming Brazilian economy is in its fourth year of slow growth and barely grew in the first quarter as investment plunged.

For the first time, more Brazilians fear Brazil's economic situation will worsen (36 percent compared to 28 percent in May) than believe it will continue the same (32 percent compared to 41 percent).

Prices are the main concern: 64 percent of those polled think inflation will get worse, up from 58 percent in May.

Annual inflation sped up to 6.37 percent in May, close to the government's target ceiling, data showed on Friday.

Forty-eight percent of voters think unemployment will rise, compared with 42 percent last month.

Datafolha surveyed 4,337 people June 3-5. The poll has a margin of error of plus or minus 2 percentage points. (Reporting by Anthony Boadle; Additional reporting by Asher Levine in Sao Paulo and Walter Brandimarte in Rio de Janeiro; Editing by Bernadette Baum, Sofina Mirza-Reid, W Simon, Jeb Blount and Bernard Orr)

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