June 18, 2020 / 1:00 PM / 18 days ago

UPDATE 1-Brazil economic activity slumps at record pace in April to 14-year low

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By Jamie McGeever

BRASILIA, June 18 (Reuters) - Brazil’s economy screeched into reverse in April, central bank figures showed on Thursday, with activity falling at the fastest pace on record as the first full month of social isolation and lockdown measures to combat the new coronavirus took their toll.

The central bank’s IBC-Br index, a leading indicator of gross domestic product, fell 9.7% in April to its lowest level since October 2006.

By this measure, the level of activity in Latin America’s largest economy is now back to where it was almost 14 years ago.

The 9.7% fall was less than the 11.0% decline expected in a Reuters poll of economists, but was still by far the biggest drop since the series began in 2003. March’s decline was revised slightly to -6.2% from -5.9%.

The data was the latest to underscore the scale of the economic shock in April. Retail sales, service sector activity, industrial production and purchasing managers indexes all fell at their fastest pace on record during the month.

According to Alberto Ramos, head of Latin American research at Goldman Sachs, the figures show that real GDP is now 20.5% below the December 2013 peak, and all the growth accumulated since the December 2016 cyclical trough has been erased.

“While the viral pandemic is yet to be brought under control, recent data and some of our metrics suggest that activity may have hit bottom and reached an inflection point sometime in mid-May,” he wrote in a note on Thursday.

The central bank on Wednesday cut interest rates by 75 basis points to a new low of 2.25%, and said there may be room for some further small, “residual” easing in the coming months.

Reporting by Jamie McGeever Editing by Bernadette Baum

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