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The Central Bank published on Wednesday its economic activity index for October, suggesting that the Brazilian economy shrunk by 0.06 percent when compared to the previous month. The IBC-Br index is considered a reliable bellwether of official gross domestic product data.
While negative, October results beat expectations — analysts expected a drop of as much as 0.2 percent.
The index has flagged three consecutive monthly drops in activity, but the year-to-date index is up 2.36 percent.
The International Monetary Fund expects the Brazilian economy to grow by 3.1 percent this year, the second-highest growth rate in South America (Guyana, propped by newfound oil riches, is set to grow by a staggering 38 percent).
Still, economic activity has cooled off — partly due to the Central Bank’s restrictive monetary policy. Borrowing costs have gone up since 2021, and the country’s benchmark policy rate has been in the double digits since March 2022. The bank has slashed rates by a half percentage point in each of its past four policy meetings, bringing it down to 11.75 percent.
An index measuring families’ propensity to spend has dipped for the first time in two years as consumers worry about their future purchasing power.
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