Brazil’s Economy in April Declines More Than Analysts Expected

Brazil’s economy in April shrank for the sixth time in the past seven months, as the central bank continues to raise rates in Latin America’s largest economy.

The seasonally adjusted economic index, a proxy for gross domestic product, fell 0.84 percent in April from the prior month after dropping a revised 1.51 percent in March, the central bank said Friday in a report posted on its website. That was below all but one estimate from 33 economists surveyed by Bloomberg, whose median forecast was for a 0.40 percent drop.

Brazil is the only nation in the Group of 20 raising rates, as inflation is set to breach the upper range of the target for the first time since 2003. Monetary tightening and fiscal austerity measures are slowing the economy, which is expected to face the worst recession in 25 years.

The non-seasonally adjusted economic activity index fell 3.13 percent from a year ago, compared with a median estimate of a 2.5 percent drop, the central bank report said.

The central bank has increased the benchmark interest rate in the last six meetings by a total of 275 points. Policy makers said in the minutes of their June 2-3 meeting that the efforts to fight inflation are still insufficient and the bank will act with “determination and perseverance” to bring inflation to 4.5 percent by the end of 2016.

Even with the key rate rising, annual inflation has accelerated every month this year. Analysts surveyed by the central bank forecast it will close 2015 at 8.79 percent, exceeding the upper limit of the 2.5 percent to 6.5 percent target range for the first time since 2003.

Economists surveyed by the central bank see Brazil’s gross domestic product shrinking 1.35 percent this year before rebounding to 0.9 percent growth in 2016.

[“source-bloomberg.com”]