Brazil has lost its momentum. If it ever had any following a dismal 0.2 percent print in the national GDP in the first quarter.
On Tuesday, Brazil industrial production figures showed that there are no signs of a recovery just yet in Latin America’s largest economy.
A mix of poorly timed monetary and fiscal policy decisions poured into a poor global economy has been nothing short of a cocktail full of wrong.
Industrial production fell below expectations again in May, dropping 0.9 percent month over month (seasonally adjusted figures) while market expectations were for around a 0.3 percent to 0.6 percent contraction.
On a yearly comparison, IP moved further down, to -4.3 percent year over year from -3.5 percent in April and -2.3 percent in March. Year-to-date industrial production has already dropped 2.8 percent.
All of this with historically low interest rates of just 8.5 percent for the benchmark Selic rate and a return to 2008-style stimulus for some sectors of the economy, namely automotive.
Last Monday, Itau Unibanco lowered their GDP forecast to 2 percent from 3 percent. Earlier in the year, Finance Minister Guido Mantega said the economy would grow at 4 percent.
Then by the end of the first quarter, Mantega said that he’d be happy with 2.5 percent growth, equal to that of 2011 GDP. Unless Brazil gets a huge bounce in the third and fourth quarter, Brazil’s 2012 GDP will likely underperform 2011′s.
“We revised it (GDP) lower because the first quarter was worse than we thought and we think the second quarter is going to be under 1 percent,” said Ilan Goldfajn, chief economist at Itau. “Growth would have to be amazing in the second quarter for you to get growth over 2 percent this year.
Brazil is facing a soft landing,” he said. Goldfajn said the government’s stimulus did not would work as fast as they had liked it to.
“We’ve been unable to forecast the lag times between stimulus and its effects on the economy. Maybe the lags are longer than we thought.
It’s taking the country longer to rebound and when you need to rebound and the global economy is spiraling downward and China is slowing and commodities are falling it makes it harder for a rebound,” he said.
Low interest rates, low unemployment of around 5.3 percent and rising wages still hasn’t changed the growth story for Brazil.
Audrey Kaplan, co-head of international equities and a senior portfolio manager at Federated Investors, told Forbes this week that she was overweighting Brazil compared to the MSCI Emerging Markets index.
forbes.com
On Tuesday, Brazil industrial production figures showed that there are no signs of a recovery just yet in Latin America’s largest economy.
A mix of poorly timed monetary and fiscal policy decisions poured into a poor global economy has been nothing short of a cocktail full of wrong.
Industrial production fell below expectations again in May, dropping 0.9 percent month over month (seasonally adjusted figures) while market expectations were for around a 0.3 percent to 0.6 percent contraction.
On a yearly comparison, IP moved further down, to -4.3 percent year over year from -3.5 percent in April and -2.3 percent in March. Year-to-date industrial production has already dropped 2.8 percent.
All of this with historically low interest rates of just 8.5 percent for the benchmark Selic rate and a return to 2008-style stimulus for some sectors of the economy, namely automotive.
Last Monday, Itau Unibanco lowered their GDP forecast to 2 percent from 3 percent. Earlier in the year, Finance Minister Guido Mantega said the economy would grow at 4 percent.
Then by the end of the first quarter, Mantega said that he’d be happy with 2.5 percent growth, equal to that of 2011 GDP. Unless Brazil gets a huge bounce in the third and fourth quarter, Brazil’s 2012 GDP will likely underperform 2011′s.
“We revised it (GDP) lower because the first quarter was worse than we thought and we think the second quarter is going to be under 1 percent,” said Ilan Goldfajn, chief economist at Itau. “Growth would have to be amazing in the second quarter for you to get growth over 2 percent this year.
Brazil is facing a soft landing,” he said. Goldfajn said the government’s stimulus did not would work as fast as they had liked it to.
“We’ve been unable to forecast the lag times between stimulus and its effects on the economy. Maybe the lags are longer than we thought.
It’s taking the country longer to rebound and when you need to rebound and the global economy is spiraling downward and China is slowing and commodities are falling it makes it harder for a rebound,” he said.
Low interest rates, low unemployment of around 5.3 percent and rising wages still hasn’t changed the growth story for Brazil.
Audrey Kaplan, co-head of international equities and a senior portfolio manager at Federated Investors, told Forbes this week that she was overweighting Brazil compared to the MSCI Emerging Markets index.
forbes.com
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