Why Brazil's Economy Is Currently Seeing Mixed Growth

Brazil’s economy has been on fire the last few months, according to recent economy data. In fact, Reuters recently reported that the country has seen four straight months of growth. “The central bank’s IBC-Br economic activity index, a leading indicator of gross domestic product (GDP), rose 0.18% in November from October, more than the 0.10% median estimate in a Reuters poll of economists,” according to Reuters.

The data shows that there has been growth in specific industries, leading to the strong economy growth. “The data tie in with other indicators for November showing solid if unspectacular growth in retail sales and the dominant services sector, and are more upbeat than recent purchasing managers index (PMI) figures,” according to Reuters.

Because of the strong growth, forecasts for the year have increased. “Latin America’s largest economy expanded by 0.6% in the third quarter of last year, more than expected and prompting many economists to revise up their 2019 and 2020 growth forecasts,” as noted by the publication.

However, not all has been booming for the economy. Some industries did, in fact, miss estimates in November. “Brazil’s retail sales grew at half the pace expected by analysts in November, capping a month of disappointing data that throws cold water on optimism surrounding the recovery of Latin America’s largest economy,” according to Bloomberg.

Notably, sales in the country were up just 0.6% despite Black Friday sales, which highlights some of the difficult times the country has been undergoing financially. “Today’s numbers substantially undershot market expectations, highlighting that the economy is not out of the woods yet,” according to Andres Abadia, Senior International Economist at Pantheon Macroeconomics, in an interview with Brazil. “Coupled with the weakness of the industrial sector and services closely linked to manufacturing, this supports our view that further monetary stimulus is needed.”

Additionally, the recent U.S.-China trade deal could also spell tough times economically for Brazil as the country may no longer be providing the Asian nation with soybeans. “The pledge by China, the dominant importer of the oilseed, to buy $200bn in U.S. goods and services over the next two years — one of several concessions to Washington in their ‘phase one’ trade deal — has stoked concerns that demand for Brazilian produce could collapse, with some analysts forecasting a $10bn hit to exports and a fourfold increase in excess stocks,” according to the Financial Times.