BRASILIA (Reuters) – A Brazilian central bank index showed on Thursday economic activity in Brazil rose much higher than expected in July, boosting expectations of a more robust expansion this year, driven by the services sector.
The IBC-Br index of economic activity, a leading indicator of gross domestic product, grew with a seasonally adjusted 1.17% from June, compared to the median forecast in a Reuters poll of economists for a 0.3% expansion.
Economic data for July showed that service activity, which accounts for about 70% of the Brazilian economy, outperforming market growth expectations, is in a strong recovery after the hit from the pandemic.
Industrial production also grew, albeit less than expected, while retail sales fell for the third month in a row.
Solange Srour, chief economist at Credit Suisse in Brazil, said the result confirms the strong dynamics of economic indicators for 2022, aided by government fiscal measures ahead of the October elections and increased social mobility.
“Over the coming months, we expect to maintain indicators of activity due to both the decline in commodity prices and the increase in government spending, despite the delayed effects of the country’s monetary policy,” she wrote in a note to clients. The economy has grown by 2.9% this year.
The central bank said the IBC-Br index rose 3.87% on a non-seasonal rate basis from July 2021, and rose 2.09% in 12 months.
Economy Minister Paulo Guedes has argued that the service sector, lower unemployment and increased private investment will help boost GDP by nearly 3% this year.
The Economy Ministry’s official estimate for expansion in 2022 improved on Thursday to 2.7% from the 2% expected in July. [nL1N30M0YK]
