December 18, 2017 / 11:35 AM / a year ago

UPDATE 1-Brazil economic activity unexpectedly up in October

(Updates from 3rd paragraph with further details, context)

By Bruno Federowski

BRASILIA, Dec 18 (Reuters) - Economic activity in Brazil unexpectedly expanded in October, central bank data showed on Monday, suggesting the nation’s recovery from the deepest recession in decades kept up momentum at the start of the fourth quarter.

Activity rose 0.29 percent from September after seasonal adjustments, following a downwardly revised 0.27 percent advance the month before. The median forecast in a Reuters poll indicated a 0.15 percent monthly decline in October.

The reading should bolster the view that a surprisingly weak October retail sales report was only a blip.

Economists expect Latin America’s largest economy set to grow around 1 percent in 2017, the fastest pace since 2013, before accelerating to 2.6 percent in 2018.

Slow inflation has boosted consumers’ purchasing power, while low interest rates ushered in a widely-awaited pickup in corporate investments.

Still, economists warn that maintaining such rates of economic growth will hinge on policymakers’ ability to cut government spending and implement structural reforms.

It is looking increasingly unlikely that lawmakers approve an unpopular bill streamlining the social security system, a landmark plan of President Michel Temer’s administration, transferring the burden to the winner of next year’s presidential elections. (Reporting by Bruno Federowski; Editing by Richard Balmforth)

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