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UPDATE 1-Central bank data suggests Brazil's economy contracted in 2014
February 12, 2015 / 11:22 AM / 3 years ago

UPDATE 1-Central bank data suggests Brazil's economy contracted in 2014

(Recasts, adds data and context)

BRASILIA, Feb 12 (Reuters) - Brazilian economy activity slipped in 2014, according to a central bank index released on Thursday, raising the prospect that gross domestic product for the year also contracted.

The central bank’s IBC-Br economic activity index dropped 0.55 percent in December from November in seasonally adjusted terms, a smaller fall than 0.80 percent expected by the market.

Still, the index pointed to an economic contraction of 0.15 percent in the fourth quarter versus the previous quarter, leading to negative growth of 0.12 percent in all of 2014.

The IBC-Br index is a gauge of activity in the farming, industry and services sectors, tallying much of the economy measured by gross domestic product figures released by the national statistics institute known as IBGE. The institute is scheduled to release fourth quarter GDP results on March 27.

A sharp drop in business and consumer confidence during leftist President Dilma Rousseff’s first term dented investment and dragged down the once-booming Brazilian economy.

To regain the markets’ trust, Rousseff has vowed to leave behind some of the interventionist policies that scared off investors in a second term that started in January.

Rousseff has started to rein in spending and raised taxes to put Brazil’s fiscal accounts in order, an adjustment that is expected to further curb economic activity this year.

The looming threat of widespread energy and water rationing and higher interest rates is also likely to damage an economy that grew more than 4 percent a year in the last decade. (Reporting by Alonso Soto; editing by John Stonestreet and W Simon)

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