Brazil Posts First-Quarter Growth Despite March Contraction

• Brazil's economy exhibited a higher-than-expected contraction in March but still managed to clinch a positive performance in the first quarter, central bank data showed on Wednesday.
• The country's IBC-Br economic activity index, considered a leading indicator of gross domestic product (GDP), posted a seasonally adjusted growth of 1.08% in the first quarter.
• The quarterly performance followed a 0.34% decrease in March from the previous month, compared with a 0.25% drop expected by economists polled by Reuters. On a non-seasonally adjusted basis, the IBC-Br index fell by 2.18% over March 2023 but increased by 1.68% in the 12-month period.
• Brazil, Latin America's largest economy has been propelled by increased household consumption amid rising disposable income under policies of larger welfare cash handouts and real minimum wage gains implemented by leftist President Luiz Inacio Lula da Silva. This backdrop is also supported by a robust labour market, which has been driving growth in the service sector.
• However, GDP is expected to slow down compared to last year's growth of 2.9%. While the government officially projects a 2.2% expansion for the economy this year, economists surveyed weekly by the central bank forecast a slightly lower rise of 2.09%.
• The lower expectation largely reflects uncertainties regarding how the historic flooding in Brazil's southernmost state of Rio Grande do Sul, which caused widespread destruction and displaced over half a million people, will impact economic activity.

(Source: Reuters)