November 30, 2018 / 12:24 PM / a year ago

UPDATE 1-Brazil Q3 GDP bounces back from impact of strike, meets expectations

(Adds details of release, context)

By Bruno Federowski

BRASILIA, Nov 30 (Reuters) - The Brazilian economy accelerated sharply in the third quarter as record-low interest rates and a one-off government-led boost helped it bounce back from the impact of a nationwide truckers’ strike.

Gross domestic product rose 0.8 percent from the second quarter and 1.4 percent from the third quarter of 2017, government statistics agency IBGE said on Friday. Economists polled by Reuters had expected growth rates of 0.8 percent and 1.6 percent, respectively.

That expansion, the largest since the first quarter of 2017, followed an upwardly revised rate of 0.2 percent in the first quarter.

The reading suggests the outlook for a gradual recovery from Brazil’s deepest recession in decades remained intact, despite uncertainty leading up to the nation’s presidential election in October.

Investments soared 6.6 percent from the previous quarter, the largest increase in almost 9 years, a welcome boost to an economy that saw capital spending plummet as it sunk into a recession in 2015-16.

Yet that probably oversells the economy’s underlying strength. Much of the expansion took place as companies resumed operations following a late-May truckers’ protest that blocked major roadways and crippled key business sectors.

The services sector, Brazil’s largest, contributed the most to economic growth, while agribusiness expanded for a third straight month.

“That growth relates to the recovery from the truckers’ strike, which compensated for the operational paralysis in the second quarter,” IBGE economist Rebeca Palis said.

Meanwhile, a government measure allowing workers to withdraw funds from inactive severance accounts helped to boost consumer spending, which advanced 0.6 percent. The move is expected to inject 15 billion reais into the economy this year.

Economists widely agree that boosting long-term growth hinges on President-elect Jair Bolsonaro, a far-right lawmaker who pledged to rein in a growing budget deficit by spurring privatization and deregulation.

Contradictory statements from within Bolsonaro’s own team, as well as his track record of denigrating minorities, means he could have difficulty garnering support of lawmakers for an unpopular social security reform seen as crucial to achieving that goal. (Reporting by Bruno Federowski; Editing by Robin Pomeroy and Bernadette Baum)

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