RIO DE JANEIRO--Dark clouds are building around the Brazilian economy, with leading indicators in the red and authorities equipped with fewer tools to stimulate growth than in years past, research institute The Conference Board, or TCB, said Wednesday.
Brazil's leading economic index, or IACE, a composite of eight forward-looking indicators launched Wednesday by The Conference Board alongside the local Getulio Vargas Foundation, fell 0.6% in June from May.
Bart van Ark, The Conference Board's executive vice president and chief economist, said the result will likely lead the group to revise down its forecast for Brazil's 2013 economic growth to 2% from the current 2.5% in its next quarterly update, due in late July or early August.
"This morning's release give me reason to believe that growth is much more likely to be 2%," Mr. van Ark said at a press conference. The Conference Board now publishes leading indicators for 12 countries, including advanced economies as well as China and Mexico, and says they tend to anticipate downturns or pickups in economic growth.
In the case of Brazil, the IACE would have predicted each of the country's last four recessions by falling as much as six months in advance. June was the second straight month in which Brazil's IACE declined.
The index fell 2.3% in the first half of 2013. The last time the IACE would have shown a contraction of that scale was in 2011, a year in which Brazil's economic growth slowed to 2.7% from 7.5% in 2010 and turned slightly negative in the third quarter.
But Mr. van Ark noted that Brazilian authorities have relatively fewer options to goose the economy than they did at that time. Inflation is above-target and the central bank is raising interest rates, while slowing growth in China has sapped demand for the commodities that Brazil exports, local consumers are more indebted and the government's primary budget surplus is smaller.
Paulo Picchetti, an economist at the Getulio Vargas Foundation's economic research institute, which provides most of the indicators for the IACE, said that recent street protests across Brazil may have weighed on business and consumer surveys included in June's index but that he expects additional effects to show up in July. Lower food inflation, on the other hand, could make consumers more optimistic.
Mr. Picchetti added that he doesn't believe Brazil is headed for a recession in light of the new IACE data. "The point of this indicator is to flash a yellow light, and that yellow light flashing," Mr. Picchetti said. "At the least, we can expect a slowdown in the pace of activity during the coming months and quarters."
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Brazil's leading economic index, or IACE, a composite of eight forward-looking indicators launched Wednesday by The Conference Board alongside the local Getulio Vargas Foundation, fell 0.6% in June from May.
Bart van Ark, The Conference Board's executive vice president and chief economist, said the result will likely lead the group to revise down its forecast for Brazil's 2013 economic growth to 2% from the current 2.5% in its next quarterly update, due in late July or early August.
"This morning's release give me reason to believe that growth is much more likely to be 2%," Mr. van Ark said at a press conference. The Conference Board now publishes leading indicators for 12 countries, including advanced economies as well as China and Mexico, and says they tend to anticipate downturns or pickups in economic growth.
In the case of Brazil, the IACE would have predicted each of the country's last four recessions by falling as much as six months in advance. June was the second straight month in which Brazil's IACE declined.
The index fell 2.3% in the first half of 2013. The last time the IACE would have shown a contraction of that scale was in 2011, a year in which Brazil's economic growth slowed to 2.7% from 7.5% in 2010 and turned slightly negative in the third quarter.
But Mr. van Ark noted that Brazilian authorities have relatively fewer options to goose the economy than they did at that time. Inflation is above-target and the central bank is raising interest rates, while slowing growth in China has sapped demand for the commodities that Brazil exports, local consumers are more indebted and the government's primary budget surplus is smaller.
Paulo Picchetti, an economist at the Getulio Vargas Foundation's economic research institute, which provides most of the indicators for the IACE, said that recent street protests across Brazil may have weighed on business and consumer surveys included in June's index but that he expects additional effects to show up in July. Lower food inflation, on the other hand, could make consumers more optimistic.
Mr. Picchetti added that he doesn't believe Brazil is headed for a recession in light of the new IACE data. "The point of this indicator is to flash a yellow light, and that yellow light flashing," Mr. Picchetti said. "At the least, we can expect a slowdown in the pace of activity during the coming months and quarters."
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