Brazil GDP Rose 1.9% in Q2

Brazil’s economy emerged from its first recession since 2003 in the second quarter powered by domestic demand., Bloomberg 9/11/2009 9:22:15 AM

Brazil’s economy expanded 1.9 percent in the second quarter from the previous three-month period, the national statistics agency said today in Rio de Janeiro.  Gross domestic product dropped 1.2 percent from a year earlier.

Six straight months of job growth, coupled with tax breaks and record low borrowing costs, are driving consumer spending, helping Brazil rebound from the global financial crisis faster than was previously expected, said Alexandre Schwartsman, chief economist for Banco Santander SA in Sao Paulo.

Industrial production rose in July for a seventh straight month as companies restocked inventories to meet demand primed by tax breaks on cars, electronics and construction materials. As a result, retail sales growth quickened to 5.1 percent in the April-June period from 3.7 percent pace in the first quarter.

After peaking this year at 9 percent in March, unemployment has fallen steadily, to 8 percent in July. Job creation in July, at 138,402, was the fastest since September, when the global financial crisis forced layoffs.

With worker income growing, and the biggest impact from interest-rate cuts still to be felt, consumer spending should post further gains even as fiscal stimulus measures are phased out, Schwartsman said.

Central bank policy makers left the benchmark Selic rate this month unchanged at 8.75 percent, signaling that five cuts from a two-year high of 13.75 percent in January was enough to stoke growth. Total outstanding loans rose 2.6 percent to a record 1.31 trillion reais ($719 billion) in July, the fastest monthly expansion since October.

Since July, forecasts for economic growth next year have steadily risen to 4 percent, from 3.5 percent, according to a weekly central bank survey of about 100 economists. Analysts expect the economy to shrink 0.16 percent this year, less than the 0.73 percent contraction estimated in May.

To be sure, the contribution to growth from exports may slacken, as the improvement in domestic demand increases imports and could tighten a trade surplus that reached $20 billion through August, 18 percent more than the first eight months of last year.

Brazil GDP Rose 1.9% in Q2