Brazil's Economy Expands at Fastest Pace in Six Quarters
By Jeffrey T. Lewis and Paulo Trevisani
SÃO PAULO -- Brazil's economy grew at the fastest pace in six
quarters in the three months through September, as record low
interest rates spurred consumer spending and investment.
Brazil's gross domestic product expanded 0.6% in the third
quarter from the previous quarter and 1.2% from the same period a
year earlier, the Brazilian Institute of Geography and Statistics,
or IBGE, said Tuesday.
In the second quarter, GDP expanded a revised 0.5% from the
previous three-month period and 1.1% from a year earlier.
The faster growth comes as declining inflation has led to
unprecedentedly low borrowing costs. The Brazilian central bank's
benchmark lending rate is now 5%, compared with 14.25% three years
ago, and the bank has signaled another half-point rate cut next
week at its last policy meeting of 2019.
The rate cuts and a slow, but steady, decline in joblessness
have boosted demand for consumer loans, especially for vehicles and
mortgages. Household spending increased 0.8% in the latest quarter
and 1.9% from a year earlier, the IBGE said Tuesday.
"It's all about lower interest rates and the improvement in
employment," said Julio César Barros, an economist at Mongeral
Aegon Investimentos in Rio de Janeiro.
The pro-business administration of President Jair Bolsonaro has
allowed Brazilians to use part of a mandatory savings fund that
workers can normally only withdraw when fired, retiring or buying
their first home, providing consumers with more spending money.
Businesses are taking advantage of lower borrowing costs too,
with lending to companies growing 9.9% in the same period. The
advance of a pension overhaul bill through Congress over the course
of the year has boosted confidence and encouraged an increase in
investment, economists said.
Gross fixed-capital formation, a measure of investment outlays,
grew 2% in the quarter and 2.9% from a year earlier.
The pension bill, which got final approval from the Senate in
October, will save the insolvent pension system almost $200 billion
over 10 years, which should help the government reduce its budget
deficit and invest more in education, health care and other
Economists forecast a meager 1% GDP growth this year, which
would be about the same growth rate in the two previous years,
following a major contraction in 2015 and 2016. The unemployment
rate remains at a high 11.6% level.
Write to Jeffrey T. Lewis at firstname.lastname@example.org and Paulo
Trevisani at email@example.com
(END) Dow Jones Newswires
December 03, 2019 08:13 ET (13:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.