Brazil: Recovery will continue to be slow - Wells Fargo

Analysts from Wells Fargo, point out that the Brazilian economy posted the first year-over-year positive growth rate since Q1 2014, expanding just 0.3% They see the recovery process to continue to be slow. 

Key Quotes: 

“The Brazilian economy posted a year-over-year growth rate of 0.3 percent in Q2, the first positive year-over-year print since the first quarter of 2014. Most of the improvement from the demand side of GDP came through a 2.5 percent year-over-year increase in real exports of goods and services and a 0.7 percent increase in personal consumption expenditures (PCE).”

“However, not all news in this release was good. Another reason for the positive year-over-year growth rate was because real imports of goods and services declined 3.3 percent compared to Q2 2016. Recall that imports of goods and services entered the calculation of GDP with a negative sign. This negative reading in imports plus the fact that real gross fixed investment plunged 6.5 percent compared to last year also paints a still not so positive view of the Brazilian economy. Furthermore, government expenditures declined 2.4 percent in Q2 versus a year earlier, underscoring the limited ability of the Brazilian government to drive economic growth as was the case in the past.”

“Although the Brazilian economy has finally gotten out of this historic recession, the recovery process will continue to be slow. The still unstable political environment and the difficult fiscal situation will continue to prevent the economy from recovering at a faster pace even as the Brazilian central bank continues to expand monetary policy.”