(Adds finance minister, market reaction)
By Brian Winter and Silvio Cascione
SAO PAULO/BRASILIA May 30 Brazil's economy
barely grew in the first quarter as investment plunged,
reflecting a broad malaise that has stirred recent labor unrest
and street protests as President Dilma Rousseff seeks a second
Data released by the government on Friday was for the most
part like a broken record of the last three years in Brazil:
Shrinking factory output, falling investment and flat consumer
spending, while a good performance by agriculture and heavy
government spending ahead of the October election tilted the
overall balance toward modest growth.
Gross domestic product grew 0.2 percent from January to
March compared to the previous quarter, statistics agency IBGE
said. That was a slower rate than 0.4 percent growth in the
fourth quarter, a number that was revised downward.
"I couldn't find anything positive at all in the (data),"
said Bruno Rovai, an economist at Barclays.
He and other economists said falling confidence among
investors and consumers, plus rising inventories, likely spelled
continued weak activity through 2014 and probably beyond.
Brazil's stock market fell 1.5 percent to a one-month low as
pessimism spread to local companies.
After a long commodities-fueled boom last decade, Brazil's
economy has fallen from grace on Wall Street and averaged just 2
percent annual growth under Rousseff's left-leaning policies.
Unemployment remains near record lows while poverty
continues to fall, and many Brazilians are still happy with the
gains they've made over the past decade. That helps explain why
Rousseff retains a healthy lead over her two more centrist main
opponents in polls ahead of the Oct. 5 vote.
Still, many voters, especially those in the middle class,
are frustrated by bad infrastructure and 6 percent annual
inflation eating away at their wages - and they've been
increasingly inclined to vent their anger via strikes and street
Possible unrest during the World Cup, which starts on June
12 in Sao Paulo, is a big concern for the government and world
soccer body FIFA as the economic tensions mix with Brazilians'
anger over public money being spent to host the tournament.
The World Cup will provide a needed boost to Latin America's
biggest economy as more than 600,000 foreign tourists are
expected to attend. The government expects the event will goose
GDP by 0.5 percentage points, while private economists expect a
smaller, 0.2 percentage-point increase.
Nevertheless, economists on average have said they expect
GDP to grow just 1.6 percent in 2014 - and some said they would
lower their forecasts once they fully analyze Friday's data.
Finance Minister Guido Mantega pointed out that GDP in the
United States shrank in the first quarter, and said activity in
Brazil should pick up as the global economy improves.
"We'll probably have a better second quarter," he told
Fixed investment fell for a third straight quarter, down 2.1
percent compared to the fourth quarter. Investment now accounts
for 17.7 percent of Brazil's GDP - one of the lowest rates in
Latin America, helping explain the lousy ports, roads and public
services that have drawn many protesters' rage.
Household spending shrank 0.1 percent compared to the
previous quarter, its first decline in nearly three years.
Industry shrank 0.8 percent, while agriculture grew a healthy
Government spending was the other bright spot, expanding 0.7
percent. Rousseff's support among many voters is underpinned by
her government's welfare and housing construction programs.
However, analysts have blamed the heavy budget spending for
fueling inflationary pressure - which has in turn forced the
central bank to sharply hike Brazil's benchmark interest rate to
its current level of 11 percent, among the world's highest.
Many economists say that only an ambitious overhaul of
Brazil's complex tax code and other structural reforms could
return the economy to its glory days of 2002-10, when GDP often
grew better than 5 percent a year.
Friday's GDP result was in line with market expectations in
a Reuters poll. For a breakdown of Brazil's GDP data
by sector, see. For economists' remarks on the
GDP figures see.
(Editing by Todd Benson and W Simon)