Friday’s data showed Brazilian GDP contracted 0.6% (annualized) in Q2, worse than -0.4% expected. Compounding the decline was a revision in Q1 GDP to -0.2% from +0.2%.
That puts Brazil in a technical recession.
Brazil quarterly GDP
The past four quarters have been a rough period for Brazil with the economy contracting 0.9% y/y
Analysts around the world lowered 2014 GDP forecasts in the aftermath with many now seeing miniscule growth in the zero to +0.5% range in 2014 from the previous consensus at +0.9%. Perhaps the most concerning part is the 5.3% y/y fall in investment on the heels of a 2.8% fall in Q1.
The result likely rings the death knell for President Dilma Rousseff as polls already show her as likely to lose in a runoff to Marina Silva. The good news is that Silva may spark renewed investment on optimism about a friendlier climate for business.
But the overall picture of an economy with excellent demographics and abundant natural resources doesn’t bode well for the rest of the world.