August 31, 2018 / 1:05 PM / 3 months ago

Brazil's economic growth picks up in second-quarter despite truckers' strike

BRASILIA (Reuters) - The Brazilian economy accelerated slightly in the second quarter despite a nationwide truckers’ strike, as a slow and uneven recovery rumbled on ahead of presidential elections in October.

FILE PHOTO: A market, with low stock, due to the truckers strike is pictured in Rio de Janeiro, Brazil May 28, 2018. REUTERS/Ricardo Moraes/File Photo

Brazil’s gross domestic product (GDP) grew 0.2 percent from the first quarter and 1.0 percent from a year before, government statistics agency IBGE said on Friday. BRGDP=ECI BRGDPY=ECI

That compares with economists’ consensus forecasts of 0.1 percent and 1.1 percent, respectively.

The data followed a revised 0.1 percent expansion in the first quarter from the previous three months, compared to the previously published 0.4 percent.

The second quarter was nevertheless the fastest expansion in Brazil since the third quarter of 2017.

The reading “consolidates a view that the recovery lost steam through 2018,” Itaú economist Arthur Passos said.

Truckers protesting high diesel prices blocked major roadways in the final weeks of May, curbing inputs to several industries and driving widespread product shortages.

Coupled with political uncertainty, that contributed to the first decline in capital expenditure in the second quarter after four quarters of growth even as interest rates remained at all-time lows. The industrial sector also contracted, snapping three straight quarters of growth.

Household spending, which until now had spearheaded the economic recovery, rose only 0.1 percent in the quarter, weighed down by a strike-driven spike in inflation.

The data sounded an ominous tone for an already sluggish bounceback from Brazil’s deepest recession in decades as the presidential campaign kicks off with no clear outcome in sight.

A weekly central bank survey showed Brazil’s economy is likely to grow 1.47 percent this year, slightly less than the government’s official 1.6 percent forecast and far below the estimate of roughly 2.5 percent before the late-May protests.

Economists widely agree that bolstering Brazil’s growth outlook hinges on cutting government spending and curtailing public debt, a scenario that is looking increasingly uncertain as voter intention polls continue to paint a blurry picture.

Still, underwhelming economic growth should keep a lid on inflation, allowing the central bank to refrain from hiking rates even amid weakness in the Brazilian real BRBY, which has tumbled to a 2-1/2-year low.

The bank has acknowledged the effect of the strike on growth, but has offered no hints on future policy due to greater uncertainty. Economists polled by Reuters widely expect policymakers to wait until next year before hiking rates.

Yields paid on interest rate futures <0#DIJ:> rose slightly in early trading, tracking a weaker currency in the wake of rising risk aversion worldwide.

Reporting by Bruno Federowski; Additional reporting by Marcela Ayres; Editing by Daniel Flynn and Paul Simao

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