The Central Bank reported this Thursday (7th) that the level of economic activity in Brazil, measured by the Economic Activity Index (IBC-Br), grew 1.09% in March and dropped 0.44% in April this year. In the first four months of the year, growth was 1.6%, according to the BC.
The Index of Economic Activity (IBC-Br), calculated by the BC, is known as the “preview of GDP”. The GDP (Gross Domestic Product) is the sum of all goods and services produced in the country and serves to measure the evolution of the economy.
The BC indicator tries to anticipate the official GDP result, released by the Brazilian Institute of Geography and Statistics (IBGE) — understand the difference below.
The most recent data released by the BC had been the increase of 0.34% in the indicator observed in February.
With the end of the strike by BC servers, the institution released this Thursday the result for March along with the data for April.
EVOLUTION OF THE IBC-Br IN 2022
Results compared to the previous month (after seasonal adjustment)
Source: Central Bank
The IBC-Br is released at a time of economic slowdown, as a result of high inflation and the basic interest rate in the economy, in addition to the war in Ukraine — which has an impact on world growth.
For this year, the financial market estimates a 1.2% increase in GDP, with a strong deceleration compared to the 4.6% growth of 2021. The Ministry of Economy projects a GDP growth of 1.5% in 2022.
Brazil’s GDP grows 1% in the 1st quarter, driven by services
The Central Bank’s IBC-Br is an indicator created to try to anticipate the GDP result, but the results did not always show proximity to the official data released by the IBGE.
The calculation of the two is slightly different – the BC indicator incorporates estimates for agriculture, industry and the service sector, in addition to taxes, but does not consider the demand side (incorporated in the IBGE’s GDP calculation).
The IBC-Br is one of the tools used by the BC to define the country’s basic interest rate, the Selic. The rise in the rate restricts credit and contracts investments in the economy. With lower economic growth, theoretically there would be less inflationary pressure.
In June, the Selic rate reached 13.25% per year, the highest level since 2016. In a statement after the last meeting of the Monetary Policy Committee (Copom), the Central Bank said it expected a new advance in the Selic rate at the next meeting, scheduled to the beginning of August.