CEIC's Brazil GDP Nowcast: Q2 annual growth rate to slow down to a 2020 low

Brazil's Q2 GDP is scheduled to be released on Thursday, September 1st, and according to CEIC's nowcast Latin America's biggest economy will grow by 1.16% y/y from the final Q1 figure of 1.69% y/y. If materialized, this would be the lowest level since Q4 2020, when real GDP shrank by 0.9% y/y negatively impacted by the pandemic-related restrictions.

The expansion in Q2, albeit slower, is supported by a good performance of foreign trade and transportation, and an above-average business confidence. On the other hand, inflation indices, financial indicators, and consumption variables – such as sales of construction materials and vehicles – had a negative effect on the Q2 GDP estimate, reducing it by 0.86pp.

For Q3 2022, we forecast that the annual GDP growth rate will rebound 1.31% y/y, driven by the recovery of automobile production in July, as well as by positive readings on the road transportation variables and the business confidence indicator. The main negative contribution comes from the consumption segment, but it reduces the Q3 estimate to a lesser extent than in Q2 – by only 0.08pp compared to 0.41pp. Key factor in this case is the decision by Brazil's federal government to extend to cash transfer programs into H2 2022, which may push retail sales up during that period.

Further data and analysis on Brazil’s economy are available on the CEIC Brazil Economy in a Snapshot – Q2 2022 report.