Household spending and services rebound support Brazilian Q2 GDP growth

Brazil's Q2 GDP surpassed expectations. Photo: Andrii Spy_k / Shutterstock

A rebound in household spending and services output were the main drivers of Brazil’s GDP growth in the second quarter, a return to normal for Latin America’s largest economy after the impressive performance of the agribusiness sector in Q1.

Economists expect more of the same in the third quarter, and some response on the investment side. However, cautioning against too much optimism, they also warn of a possible uptick in inflation, which would lead the Central Bank to slow the pace of its interest rate cuts.

According to the Brazilian Institute of Geography and Statistics (IBGE), Brazilian economic activity grew by 0.9 percent in Q2 from the previous quarter, and at an annual rate of 3.2 percent. The result far surpassed market expectations, which were for median annual growth of 2.7 percent, according to surveys by Bloomberg, Reuters and Broadcast.

As a result, analysts are already revising their projections for 2023 to something close to 3 percent, up from 2.3 percent in the latest Central Bank’s Focus Report. That’s because the Brazilian economy has already grown 3.1 percent this year, and there are no signs of contraction ahead.

If that pace holds, Brazil would be closer to the dynamic 4 to 5 percent annual levels seen in the first decade of 2000 — President Luiz Inácio Lula da Silva’s first and second terms — driven by the China-fueled commodities...

Fabiane Ziolla Menezes and Diogo Rodriguez

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.