Brazil's economy shows strength in Q2 as June activity overshoots forecasts

Published 08/16/2024, 08:32 AM
Updated 08/16/2024, 09:31 AM
© Reuters. FILE PHOTO: A drone view shows the Central Bank headquarters building during sunset in Brasilia, Brazil, June 11, 2024.  REUTERS/Adriano Machado/File Photo
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BRASILIA (Reuters) -The Brazilian economy closed the second quarter showing resilience after much stronger-than-expected activity data in June, central bank figures showed on Friday, reinforcing forecasts of a solid year for Latin America's No.1 economy.

The IBC-Br index, a key predictor of gross domestic product, increased by a seasonally adjusted 1.4% in June from the previous month, beating the 0.5% growth expected by economists in a Reuters poll.

The monthly performance led to a 1.1% expansion in the second quarter compared with the previous three months.

Brazil's economy has been supported by a strong labor market and booming services sector, which hit an all-time high in June.

Following the latest activity data, Goldman Sachs economist Alberto Ramos said he now expects the country's GDP to grow 2.5% this year, up from the 2.3% previously forecast. Santander (BME:SAN) also hiked its projections for Brazil.

"We are impressed by the current strength of Brazil's economy," Santander chief economist Ana Paula Vescovi said in a note to clients.

"We now expect an even stronger short-term dynamic, as the labor market remains robust and floods in Rio Grande do Sul had a smaller impact on economic activity than we anticipated," she added, revising her 2024 GDP growth estimate to 2.3% from 2.0%.

The second quarter's performance showed resilience despite the severe floods that hit the southernmost state of Rio Grande do Sul in May, devastating cities and displacing more than half a million people.

These events led many economists at the time to predict potential economic losses for the country.

© Reuters. FILE PHOTO: A drone view shows the Central Bank headquarters building during sunset in Brasilia, Brazil, June 11, 2024.  REUTERS/Adriano Machado/File Photo

Finance Minister Fernando Haddad said this week that the government would likely revise this year's expected economic growth forecast upwards to more than 2.5%, after maintaining the estimate at that level in July.

The official gross domestic product (GDP) figures will be released by the statistics agency IBGE on Sept. 3.

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