Brazil Posts Strong Job Figures, Signals Stronger Activity; Inflation A Concern

• Brazil released vigorous job market figures on Tuesday, April 30, reinforcing views of stronger economic activity at the beginning of this year, but keeping the central bank wary of potential impacts on inflation.
• Both the unemployment rate and formal job creation figures in Latin America's largest economy came in better than expected in their March readings, maintaining a positive trend that has excited the government and spooked policymakers.
• Brazil's jobless rate stood at 7.9% in the January-March period, according to statistics agency IBGE, slightly up from the 7.8% seen in the previous rolling quarter, but still the lowest for a quarter through March since 2014. However, the rate was below the 8.1% expected by analysts polled by Reuters in a period in which unemployment is seasonally higher.
• "Today's data indicate that we might see new adjustments in GDP growth projections as well as concerns about services inflation," Kinitro Capital economist Joao Savignon said. "They continue to portray a tight job market." "Real wages continue to grow at a relatively solid pace, leading to services inflation remaining uncomfortably high," Pantheon Macroeconomics' chief Latin America economist, Andres Abadia, said.
• Brazil's central bank, which is set to make its next monetary policy decision next week, has emphasized that it is closely monitoring the dynamics of income from various surveys to better assess the degree of slack in the labour market and its potential impacts on service sector inflation.
• The central bank has lowered its key borrowing rate by 50 basis points at each of its last six meetings, to 10.75%, and signalled in March another cut of the same magnitude in May. However, Governor Roberto Campos Neto recently said policymakers could no longer provide guidance on policy decisions due to increased uncertainties, with some believing the easing pace may be reduced.

(Source: Reuters)