February 14, 2020 / 1:21 PM / 4 days ago

UPDATE 1-Brazil economic activity falls in December, bolstering view growth is losing pace

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By Jamie McGeever

BRASILIA, Feb 14 (Reuters) - Economic activity in Brazil fell in December, a central bank indicator showed on Friday, in a steeper-than-forecast decline that ties in with other data suggesting Latin America’s largest economy lost steam at the end of last year.

The central bank’s IBC-Br economic activity index, considered a leading indicator of gross domestic product (GDP), fell 0.27% from November, compared with the median estimate in a Reuters poll of economists of a 0.23% decline.

It was the largest decline since April, which helped reduce the index’s year-on-year rise in 2019 to 0.89% from 1.34% the year before.

The 2019 increase is well below the latest average forecast in the central bank’s weekly ‘FOCUS’ survey of economists of a 1.12% rise in 2019.

The latest industrial production, retail sales and current account data have all come in weaker than expected, pointing to a broader slowdown in growth at the end of last year that is forcing many economists to reduce their 2020 forecasts.

Alberto Ramos, head of Latin American research at Goldman Sachs, wrote in a note that activity this year should be supported by low inflation, employment growth, credit growth, low interest rates, and recovering consumer and business confidence.

“But still significant slack in the labor market and subdued consumer confidence may cap the buoyancy of recovery,” he said.

The economy grew 1.1% in 2018 and is expected to have grown at a similar pace last year. The outlook for 2019 at the start of the year was more than double that rate, with Economy Minister Paulo Guedes saying 2.5% was achievable. But many of those forecasts have come down towards 2% recently. (Reporting by Jamie McGeever, additional reporting by Camila Moreira; editing by Larry King)

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