Brazil’s economic growth decelerated to its slowest pace in a year, cementing expectations the central bank may pause after raising interest rates in April.
Gross domestic product growth expanded 5 percent in the fourth quarter from a year earlier, down from 6.7 percent in the previous quarter. Economists expected a 5.2 percent expansion, according to the median forecast in a Bloomberg survey of 33 analysts.
The figure shows the economy is cooling as domestic consumption slows and industrial output suffers from weak international demand and a strong real, said Newton Rosa, chief economist at Sul America Investimentos. Policy makers, after raising yesterday the benchmark interest rate to a two-year high, signaled they will lift borrowing costs for a third consecutive meeting in April to contain the fastest inflation in more than two years.
“It’s more comfortable for the central bank to see that the economy is decelerating, and this should help bring inflation closer to the center of the target range,” Rosa said, speaking by telephone from Sao Paulo.
The real, which gained 48 percent in the past two years, rose 0.1 percent to 1.6563 per U.S. dollar at 8:38 a.m. New York time. Yields on interest-rate futures contracts maturing January 2012 fell two basis points, or 0.02 percentage point, to 12.51 percent.
Rosa said he may revise his 2011 GDP forecast to around 4 percent from 4.5 percent.
Inflation accelerated to 6.08 percent in the year through mid-February, the fastest pace since December 2008. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.
GDP grew 0.7 percent from the previous quarter, compared with a revised 0.4 percent in the third quarter, the national statistics agency said today in Rio de Janeiro. Analysts expected 0.8 percent growth, according to the median forecast from 32 analysts surveyed by Bloomberg.
Industrial activity fell 0.3 percent in the fourth quarter from the previous one, the national statistics agency said. The GDP gain was fueled by a 1 percent expansion in services.
“The economy isn’t growing as fast as everyone thought,” said Jankiel Santos, chief economist at Espirito Santo Investment Bank, speaking by telephone from Sao Paulo. “The number reinforces the central bank’s view that growth is accommodating at a level more consistent with the economy’s potential.”
The central bank raised its benchmark interest rate half a percentage point to 11.75 percent last night. The government is using a mix of tools, including spending cuts, measures to curb credit and higher borrowing costs, to slow economic growth.
Latin America’s largest economy expanded 7.5 percent in 2010, its fastest pace since 1985, after registering year-on- year growth of more than 9 percent in the first and second quarters.
Economists covering the Brazilian economy expect growth to slow to 4.3 percent this year, according to a central bank survey of about 100 economists published Feb. 28.
Brazil’s economy entered a “new growth cycle” after the financial crisis of 2008 and 2009 that’s being fueled by domestic demand, central bank President Alexandre Tombini said in an e-mailed statement this morning.
Brazil’s retail sales stalled in December for the first time since April, as lending slowed on higher borrowing costs. Credit in the Brazilian economy expanded in January at its slowest pace in almost two years after the central bank raised reserve and capital requirements in December.
© Copyright 2022 Bloomberg News. All rights reserved.