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Brazil August economic activity limp despite retail jump
October 16, 2013 / 6:28 PM / 4 years ago

Brazil August economic activity limp despite retail jump

BRASILIA (Reuters) - Economic activity in Brazil barely increased in August from July despite a surprise jump in retail sales, suggesting the overall economy likely struggled to expand in the third quarter.

The Brazilian central bank’s IBC-Br economic activity index rose a seasonally adjusted 0.08 percent in August from July, the bank said on Wednesday, missing the median analysts’ estimate of 0.2 percent growth in a Reuters survey.

“With this outcome... we are maintaining for now our expectation of a slight retraction at the margin of the Brazilian economy in the third quarter,” Brazilian bank Bradesco said in a note to clients.

Still, an unexpected surge in formal job creation in September, reported separately on Wednesday, suggested a rebound in consumer spending may continue to support Latin America’s largest economy in the second half.

After accelerating in the second quarter, the Brazilian economy is struggling to maintain steady growth as persistent high inflation hurts industrial competitiveness and keeps investors on edge.

President Dilma Rousseff has blamed much of the economic woes on global headwinds such as slower growth in China and swings in the local exchange rate.

Private economists point to supply bottlenecks such as a faulty infrastructure and high taxes as some of the main reasons behind a stretch of mediocre growth, now in its third year.

Deteriorating business confidence has dragged on employment opportunities this year, with growth of payroll jobs running behind that of 2012, despite tax cuts and other industrial stimulus.

In September, however, Brazil’s economy added a net 211,068 payroll jobs, the labor ministry said on Wednesday, up from 150,334 a year earlier, and well ahead of the 148,000 jobs estimated in a Reuters poll of economists.

It was the strongest job growth of the year, suggesting a robust labor market may keep household income healthy in the year-end period crucial for retailers and support a fragile recovery.

Retail sales jumped unexpectedly in July and August as consumer confidence rebounded and inflation cooled at supermarkets, which encouraged Brazilians to shop.

The central bank’s economic index, a gauge of activity in the farming, industry and services sectors, rose a non-seasonally adjusted 1.32 percent over the same month a year ago.

The bank revised its seasonally adjusted July versus June result to a decline of 0.34 percent from a drop of 0.33 percent.

Reporting by Alonso Soto; Additional reporting by Brad Haynes; Editing by Bernadette Baum

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