Brazilian Growth Slows Sharply in Q4 2024

• In line with Fitch’s expectations but surprising to the downside of consensus projections, the Brazilian economy effectively stagnated in Q4 with output expanding by just 0.2% on a q-o-q basis (consensus: +0.5%). Strength in preceding quarters, however, helped to keep the y-o-y rate at a reasonably elevated 3.6%, with full-year growth coming in at an impressive 3.4%.
• In terms of the underlying breakdown, the consumer was an unexpected source of weakness, with household spending contracting by 1.0% q-o-q (Q3: +1.3%). There were also some adverse developments on the external front, as exports declined by a significant 1.3% (Q3: -0.7%). Fixed investment held up reasonably well (+0.4%) but did slow sharply relative to Q3 (+2.3%), while government spending increased by another hearty 0.6% (Q3: +0.8%).
• Today’s data were in line with expectations and as such have minimal implications for projections. Brazil’s GDP growth is forecasted at 2.0% this year, reflecting relatively favourable carryover effects of around 0.5pp, a probable bounce back in consumer spending in Q1 given a still tight (albeit no longer tightening) labour market. The economy should lose considerable momentum over H2, flirting with recession as 10.0% real interest rates leave their mark.

(Source: Fitch Connect)