Key facts
- Brazil's economy grew 0.2% in the second quarter.
- The central bank's IBC-Br index, a proxy for GDP, showed the modest expansion.
- Services, the largest sector, contracted by 0.1%.
- Industry grew by 0.5% and agriculture by 0.3% in the quarter.
- The index fell 0.6% in June from May on a seasonally adjusted basis.
Brazil's economy expanded by a modest 0.2% in the second quarter compared to the previous three months, according to the central bank's IBC-Br economic activity index. This indicates a slowdown from the strong start to the year, with the crucial services sector contracting by 0.1%.
The index, considered a proxy for gross domestic product, also fell 0.6% in June from May on a seasonally adjusted basis. Official GDP figures are due from the IBGE statistics agency on September 1. In the first quarter, Latin America's largest economy had grown by 1.1%.
The positive quarterly reading was primarily driven by the industry sector, which grew 0.5%, and agriculture, which rose 0.3%. The Finance Ministry had anticipated softer growth as government support measures and credit initiatives implemented ahead of President Luiz Inacio Lula da Silva's re-election bid began to wane.
Restrictive borrowing costs continue to impact economic activity. Despite the central bank initiating an easing cycle in March, interest rates remain high at 14% in real terms, as policymakers aim to bring inflation, which was 4.44% in the 12 months through July, closer to the 3% target.