Brazilian GDP shrinks 0.1% in the 2nd quarter after 3 consecutive increases

The Brazilian GDP (Gross Domestic Product) dropped 0.1% in the second quarter of the year, compared to the first quarter. This result indicates stability and comes after three consecutive positive quarters of economic growth.

With that, the Brazilian economy advanced 6.4% in the first half. In the 12-month accumulated period, the GDP registered an increase of 1.8%.

Compared to the second quarter of last year, period in which the country was most affected by the first wave of covid-19, the economy grew 12.4%.

GDP remains at the level from the end of 2019 to the beginning of 2020, the pre-pandemic period, and is still 3.2% below the highest point of economic activity in the historical series, reached in the first quarter of 2014.

In current values, GDP, which is the sum of final goods and services produced in the country, totaled R$ 2.1 trillion in the second quarter of this year. The data were released today by the IBGE (Brazilian Institute of Geography and Statistics).

Agriculture and industry pull GDP drop in the 2nd quarter

The performance of the economy in the quarter comes from the negative result of agriculture (-2.8%) and industry (-0.2%). Among industrial activities, the performance was driven by falls of 2.2% in Manufacturing Industries and 0.9% in the activity of Electricity and gas, water, sewage, waste management activities.

These falls offset the 5.3% increase in Mining and quarrying and 2.7% in Construction. On the other hand, Services grew 0.7% in the second quarter.

One thing ended up compensating for the other. Agriculture was negative because the coffee harvest was included in the calculation. This played an important role in the second quarter. The coffee harvest is in a negative biennial, which results in a significant retraction in production.
Rebeca Palis, IBGE National Accounts Coordinator

Services grew in almost all activities

In services, the positive results came from almost all activities: information and communication (5.6%), other service activities (2.1%), commerce (0.5%), real estate activities (0.4%) , financial activities, insurance and related services (0.3%) and transport, storage and mail (0.1%). Administration, defense, public health and education and social security (0.0%) remained stable.

“Almost all components of services grew, with emphasis on trade and transport at the year-on-year rate, which were the activities most affected by the pandemic and which are now recovering the most,” said Palis.

With the 2nd wave of covid-19, household consumption remains stable

The stability of GDP in the second quarter also reflects household consumption, which did not change in the period (0.0%), still impacted by the effects of the second wave of the pandemic in the country.

Government consumption increased by 0.7%. Investments (Gross Fixed Capital Formation) dropped 3.6% in the period.

“Despite the government aid programs, the increase in credit to individuals and the improvement in the job market, the real wage bill has been falling, negatively affected by the increase in inflation. Interest rates have also started to rise. This impacts consumer consumption. families,” declared Rebeca.

Market forecasts GDP of 5.22% in 2021

The GDP result in the second quarter could alter the forecasts for the economy’s growth at the end of the year. The financial market expects the Brazilian GDP to grow by 5.22% in 2021, according to the latest Focus Bulletin, released on Monday (30) by the Central Bank.

The projection is above the expectations of the Central Bank itself, which forecasts that the Brazilian economy will grow 4.6% this year.