Brazilian economy rebounds with 0.8% growth in first quarter

By Thomson Reuters Jun 4, 2024 | 7:21 AM

By Marcela Ayres

BRASILIA (Reuters) – Brazil’s economy rebounded from a sluggish second half of 2023 as expected on stronger private investments and household demand amid a robust labor market, official figures showed on Tuesday.

While the data supports a more optimistic outlook for Latin America’s largest economy than earlier this year, concerns remain about the impact of historic flooding in southern Brazil, which has left a trail of destruction and pushed up food prices.

The country’s gross domestic product (GDP) expanded by 0.8% in the three months through March, gaining momentum from a revised 0.1% contraction in the prior quarter, according to the government statistics agency IBGE.

Economic growth from the prior quarter was in line with the 0.8% median forecast in a Reuters poll of economists, while the 2.5% year-on-year rise exceeded the expected 2.2% growth.

The stronger momentum has been fueled by a strong labor market, which spurred household consumption 1.5% higher from the previous quarter, while government spending remained flat.

Fixed business investment also showed a recovery, rising 4.1% amid a monetary easing cycle that has cut the benchmark interest rate by 325 basis points since August last year.

On the supply side, the services sector activity rose by 1.4% compared to the previous quarter. Agricultural output surprised positively with a rise of 11.3% after a steep contraction in the second half of 2023. Industrial output decreased by 0.1%.

The government of President Luiz Inacio Lula da Silva recently raised its GDP growth projection to 2.5% this year, while private economists forecast a 2.05% expansion in the central bank’s weekly survey.

Both projections indicate a slowdown from the 2.9% growth in 2023, when a record agricultural performance boosted the economy in the beginning of the year.

(Reporting by Marcela Ayres; Editing by Brad Haynes)