Brazil’s economic activity declined more than anticipated in July, falling 0.5% on a seasonally adjusted basis compared to the prior month, according to the Central Bank’s IBC-Br index. This marks the third consecutive monthly contraction and underscores weakening momentum in Latin America’s largest economy. The drop exceeded the 0.2% decline forecast in a Reuters survey, reflecting broad-based weakness across agriculture, industry, and services sectors, all of which reported negative performance. On a 12-month rolling basis, the index rose 3.5%, based on unadjusted data. n nThe country’s benchmark Selic interest rate remains at 15%, near a two-decade high, as monetary authorities continue efforts to bring inflation under control. Annual price growth has persistently overshot the 3% target, prompting the central bank to maintain a restrictive stance. Markets expect the policy rate to remain unchanged in the upcoming meeting, consistent with previous guidance. n nEarlier in the week, the finance ministry revised its 2025 GDP growth projection downward to 2.3% from 2.5%, citing sluggish performance in the second quarter and the ongoing drag from elevated borrowing costs. The adjustment highlights growing concerns about the pace of economic recovery, particularly as high rates weigh on consumer spending and business investment. Analysts suggest that a sustained rebound will depend on clearer signs of inflation moderation and potential future rate cuts.
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Brazil economic activity falls more than expected in July
BRASILIA, Sept 15 (Reuters) – Brazil’s economic activity declined more than expected in July, marking a third consecutive monthly decline, a central bank index showed on Monday, highlighting a slowdown in Latin America’s largest economy as borrowing costs remain high.
The IBC-Br index, a proxy for gross domestic product, fell 0.5% in July from the previous month on a seasonally adjusted basis, compared with the 0.2% drop expected in a Reuters poll.
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The index incorporates central bank estimates for farming, industry and services, along with production-related taxes, all of which posted negative readings in the month.
The index rose 3.5% in the 12 months through July, according to non-seasonally adjusted data.
Brazil’s benchmark Selic rate stands at 15%, near a two-decade high, as policymakers try to rein in annual inflation that has consistently exceeded the 3% target.
The central bank will announce its next policy decision on Wednesday, with markets widely expecting rates to remain unchanged, in line with earlier guidance.
On Friday, the finance ministry cut its 2025 GDP growth forecast to 2.3% from 2.5%, citing weaker-than-expected second-quarter performance and pressure from high interest rates.
Reporting by Marcela Ayres; Editing by Aidan Lewis