* IBC-BR index drops 0.33 pct from June
* Strong retail sales offset decline in manufacturing
By Silvio Cascione
SAO PAULO, Sept 13 Brazil's economic activity
contracted less than expected in July as strong retail sales
offset a sharp decline in manufacturing, bolstering hopes that
the economy can avoid a quarterly drop.
The central bank's IBC-Br economic activity index
declined a seasonally adjusted 0.33 percent in July
from June, the bank said on Friday. Economists in a Reuters poll
expected a decline of 0.9 percent.
Most analysts see Brazil's economy set to stumble in the
second half of the year after short-term stimulus triggered an
unexpected surge from April to June.
July's data suggests that decline will not be as sharp as
expected previously, though.
"Today's results suggested that the economy can remain near
stability in the third quarter, which is better than the decline
we have been expecting. This poses upward risks to our forecast
of 2.3 percent growth this year," wrote economists with research
firm Rosenberg & Associados in a note.
The IBC-Br index is seen as a proxy for gross domestic
Since President Dilma Rousseff took office in 2011, the
country's tepid growth has eroded the confidence of investors
bullish on Brazil's economy.
With the central bank raising interest rates to keep
inflation within its target range, economists have slashed their
growth estimates for this and next year and flagged the threat
of a credit downgrade as public finances are
The main surprise so far in July's economic data as a sharp
increase in retail sales, the strongest since January 2012.
Sales rose 1.9 percent in July as food prices posted
a rare decline and a new tax break program boosted home
Strong consumption offset declining industrial output in
July. Production shrank 2 percent from June as waning business
confidence hurt demand for capital goods.
The IBC-BR index is a gauge of activity in the farming,
industry and services sectors. Without seasonal adjustments, it
rose a non-seasonally adjusted 3.38 percent in July over the
same month a year ago.