11/21/2017 14h52

Brazil economic activity index up more than expected in September


Economic activity in Brazil expanded at more quickly than expected in September, central bank data showed on Monday, rebounding from the prior month’s contraction and reinforcing the outlook for a gradual recovery.

Activity rose 0.40 percent from August after seasonal adjustments, following an upwardly revised 0.37 percent decline the month before. The median forecast in a Reuters poll had indicated a 0.34 percent monthly increase in September.

The report follows strong retail figures last week and suggests the outlook for a gradual rebound from the deepest recession in over 100 years remains intact, as low interest rates, falling unemployment and slow inflation drive consumer spending.

It should also dispel fears that a government measure authorizing workers to withdraw early from a severance fund that expired in July may have accounted for a substantial share of strong second-quarter growth.

The upswing in economic activity is unlikely to stoke inflation, however, as firms continue to grapple with idle capacity and employment gains concentrate on off-the-books jobs.

That should grant the central bank wide space to cut the benchmark Selic interest rate to an all-time low at its December meeting, as is widely expected by economists.