Brazil’s Economy Contracts 1.8%

Brazil’s economy fell into a recession for the first time since 2003 in the first quarter as the global credit crisis led to a record drop in investment and halted demand for Brazilian exports., Bloomberg 6/9/2009 11:58:53 AM

Gross domestic product fell 1.8 from a year ago and dropped 0.8 percent from the previous quarter, the second straight contraction, Brazil’s statistics agency said. Still, economists surveyed by Bloomberg were bracing for worse, forecasting a 2.8 percent annual decline and a 1.9 percent quarterly drop.

The smaller-than-expected contraction may lead central bank policy makers to slow the pace of interest rate cuts at their meeting tomorrow. Analysts expect they will trim the benchmark rate to 9.50 percent, from a previous record low of 10.25 percent, according to the median estimate of 46 economists surveyed by Bloomberg. That would be the smallest interest rate cut this year.

Investment plummeted 12.6 percent quarter-on-quarter, the biggest drop since the series began in 1996, the statistics agency said. First-quarter exports fell 16 percent. Both were partially offset by a 0.6 percent increase in government spending and a 0.7 percent rebound in household spending, compared with a 1.8 percent decline in the fourth quarter

Industrial output climbed 1.1 percent in April from March, the fourth straight monthly increase. Consumers have also remained resilient, with retail sales in March posting their third straight monthly gain. Companies resumed hiring in February after slashing a record 655,000 jobs in December.

Brazil’s Economy Contracts 1.8%