We've seen an awful lot of Brazil in recent years, hosting both the World Cup in 2014 and the Rio Olympic Games in 2016; both times there were plenty of critics to be had. Primarily due to the fact of how distraught the country's political and economy systems have been, and that Zika virus to serve as the cherry on this crazy sundae.
While one would think that hosting events on the world stage would give the country's economy a boost and give some confidence to its political leadership, that is not necessarily the case. In fact, the country continues to strive for first-world status yet lacks the middle-class necessary to sustain long-term growth. However, we didn't think that would happen in China but the country now possesses quite a massive middle-class, despite its communist structure. So, it is definitely possible for Brazil to get there in the coming years, but ultimately hosting the Olympics and World Cup have just raised awareness of Brazil as a global player rather than validating its existence as an economical power.
In recent weeks, we've learned some very interesting details regarding the Brazilian economy. Here are a few of those reports and what they indicate:
Each month, we get a sense of how consumers in Brazil view the future potential of several different economic aspects. In July, the confidence of Brazilian consumers increased to 101.2 from 101 in the prior month. These were both lower than the massive May reading of 105.2, yet this is the third consecutive month with a confidence measurement above 100. The country's prospects regarding unemployment, personal income, debt and large household purchases were actually not that optimistic, but expectations on inflation and the overall financial situation deteriorated in July relative to the prior month. Consumer Confidence in Brazil averaged 107.30 from 1996 until 2016, reaching an all time high of 120.70 in October of 2010 and a record low of 89.41 in March of 1999. Ultimately, these readings are quite positive and could also be reflective of the citizens expecting an overall boost from the tourists during the Olympics. Zika concerns apparently did not keep the crowds away which quite a few analysts expected.
Since interest rates among central banks across the globe have been so low, there were many worries regarding deflation. Brexit caused many world economies to experience some degree of inflation again, and at the moment countries like Brazil are returning to levels that are far more moderate compared to where they had been. Consumer prices (inflation) in Brazil increased by 8.74% year-over-year in July, which is easing up from a 8.84% year-over-year growth in June, yet higher than the consensus estimate of 8.66%. This is actually the lowest reading since May 2015, since housing prices and the cost of home furnishings and household equipment increased as a much slower rate. Nevertheless, inflation is still almost twice as high and the country's central bank's target of 4.5% - which compared to most first-world economies is extremely high. A rise in spending by tourists might help ease the inflation growth for the month of August, but ought not have a lasting impact.
Lastly, it's quite clear that preparations for the Olympics had at least some positive impact on the country's economic activity. The IBC-Brazil index increased by 0.23% for the month of June, after a 0.45% contraction in May. This is only the second time since December 2014 that economic activity increased. On a year-over-year basis, output decreased by 4.26%, which unfortunately sets the tone for more difficult times ahead. However, the boost to the upside in the midst of all the negative data is a huge plus going forward.
Greetings, GradMoney Readers!
October 22, 2018
Which City Has the Richest Population?
September 12, 2018
CSRIC Fun Facts: Trees & Pollution
October 24, 2018
Search By Tags
I'm busy working on my blog posts. Watch this space!