Skip to comments.Brazil Stimulus Fails to Raise Growth
Posted on 05/19/2012 6:31:11 AM PDT by Son House
Brazils economic output shrank in March, defying government stimulus measures and surprising economists who had predicted that Latin Americas biggest economy would begin to recover from a prolonged slowdown.
The 0.35 per cent contraction, compared with February, makes Brazils growth the second slowest in Latin America in real terms, after Argentina. The news comes as Asias major emerging market economies, China and India, are also decelerating.
The weak conditions are likely to encourage the authorities to add more fiscal and monetary stimulus to the economy and to remain activist on the foreign exchange front, said Alberto Ramos of Goldman Sachs in a client note.
Dilma Rousseff, Brazils president, has been ratcheting down interest rates in an attempt to kick-start an economy that last year slowed dramatically to 2.7 per cent and has virtually stalled over the past three to four quarters.
The weak March monthly figure means that in the first quarter of this year, real gross domestic product in Brazil grew 1.1 per cent compared with a year earlier, in line with 1 per cent growth in the final three months of 2011.
Brazils currency, the real, has fallen in value against the dollar, nudging above R$2 to the dollar this week for the first time in about three years.
The reals troubles come amid growing risk aversion towards emerging markets as investors shun the once coveted asset class for safer assets, amid fears that Greece will splinter from the eurozone. FT series
Chinas growth slowed to 8.1 per cent in the first three months of this year from the same period a year earlier, down from 8.9 per cent growth in the fourth quarter of last year.
Economists surveyed by Bloomberg expect China to grow 7.9 per cent this quarter and rebound to 8.3 per cent in the third.
In India economic growth was 6.1 per cent in the final quarter of last year the slowest rate of increase in three years compared with more than 8 per cent a year earlier.
In Brazil, yields on interest rate future contracts fell to a record low on Friday after the GDP figures.
Economists had forecast an economic expansion of 0.4-0.5 per cent month-on-month in March.
The recovery appears to be more sluggish than what we were previously expecting and the major risk is that the deterioration of the European debt crisis could start to dent sentiment, Marcelo Salomon, a Barclays economist, said in a research note.
The stubborn slowdown comes despite rate reductions that have cut 350 basis points off the Brazilian central bank benchmark lending rate, the Selic. The central bank is expected to cut the Selic from 9 per cent to 8.5 per cent, a 15-year low, when it meets this month.
Brazils economic troubles have yet to dent the popularity of Ms Rousseff, however, who is presiding over a period of record low unemployment and solid pay increases.
But while consumer demand remains strong, domestic industry is feeling the brunt of the weakness in the economy, as the strong currency has attracted a flood of cheap imports, undermining Brazilian manufacturing.
The car industry is also reeling from a rise in auto loan defaults, which has slowed sales and is leading to a build-up of stocks among major suppliers.
And if you recall China’s Stimulus, it was $586 billion(US), and the Chinese economy is about 1/3 ours.
China Gets Surprise Slowdown
Zhang Zhiwei, a China analyst at Nomura research. “The economy has now slowed down so much that there will be a consensus to promote growth.”
Nothing like a state-run economy, eh, Mr O’Reilly?
Bill O’Reilly “This is not a partisan analysis. When President Obama took office, I knew he was an income redistribution guy. In fact, I challenged him on that in our first interview during the 2008 campaign. But once elected I decided to give the president a chance to see if his economic vision, big government management of the economy, could turn things around. Well, we all know things have gotten worse, not better.”
Thanks Son House.
How could it not work? They called it a stimulus and everything. It has to work./s
You’re right! But Paul Krugman will say that they didn’t go big enough. That’s what he said about Obambi’s stimulus - it wasn’t big enough. That is also why these idiots say socialism will work; “It just hasn’t been tried properly! When we do socialism we’ll do it so it will work the way it was meant to work.” ...And for some reason it never does.
How big will be big enough? If it fails, it wasn’t big enough. So it’ll keep on failing and not being big enough forever. Lunacy the Albert Einstein way.