Brazil’s economy grew 0.9% in the three months to June, Brazil’s Institute of Geography and Statistics (IBGE) reported on Friday, significantly beating expectations after a bumper harvest eased.
Brazil’s gross domestic product (GDP) grew quarter by quarter, significantly faster than the median of 0.3% expected in a Reuters poll of economists. The 3.4% increase over the same period in 2022 also beat the 2.7% increase forecast by economists.
A slowdown in Latin America’s largest economy was widely expected after a revised 1.8% growth rate in the first quarter, driven by seasonal changes and a resilient agricultural sector.
From April to June, economic growth was driven by heavy industry, which rose 0.9% from the previous three months, boosted by rising oil and iron ore production, IBGE said.
Services activity also made a positive contribution, rising 0.6% on the back of a stronger job market and a shift in consumer preferences away from goods post-pandemic. Agricultural production fell 0.9% after rising in the first quarter.
On the demand side, household consumption led the way, up 0.9%, supported by President Luiz Inácio Lula da Silva’s measures to boost working-class disposable income.
Public spending increased by 0.7%. In contrast, fixed investment grew by just 0.1% due to high borrowing costs and uncertainty about the new government’s policy mix.
The central bank began a monetary easing cycle in August with a 50-basis-point cut that raised its benchmark interest rate to 13.25% after keeping borrowing costs stable for almost a year to combat inflation. Although the authorities announced future cuts, they emphasized their aim to keep interest rates in a restrictive zone.
Although interest rates remain high, private economists polled by the central bank have revised upward their annual GDP forecast.
Its latest weekly forecasts, released ahead of the IBGE data, point to growth of 2.31% this year, well above January’s estimate of 0.78%. Brazil’s economy grew by 2.9% in 2022.
Reporting by Marcela Ayres; Editing in Spanish by Ricardo Figueroa and Manuel Faras