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Unemployment
declining. Buoyant demand for Brazilian exports and
stronger than expected up ticks in the services and industry sectors have
further lowered Brazilian unemployment figures, despite the protracted
recovery of the labour-intensive construction sector. On 23 August,
IBGE reported that unemployment declined from 7.4% of the economically
active population in June to 7.2% in July. The July unemployment
data was in line with market expectations and is the second lowest rate
registered since the January 1999 Real devaluation. The IBGE data
shows that some 796,000 new workers have entered the labour force since
July 1999, which represents a 4.9% growth rate and brings the total number
of employed to 17.1 million. Whereas services and industry have
exhibited the healthiest growth rates, construction employment continues
depressed, as the private sector remains hesitant to resume building
activity despite the current downward trend in interest rates.
Nevertheless, the downward movement in unemployment shows that the
recovery in economic activity is beginning to improve labour market
conditions.
External
balance improving but not at pace expected. The trade
balance has shown a steady improvement this year, driven principally by
strong export growth. According to the most recent data release from
the Secretary of International Trade, the annual trade balance rose
further to reach US$ 542 million in August, a substantial improvement from
the US$ 4.8 billion annual deficit registered the same month last year.
Key to the shift to a trade surplus this year has been solid growth in
exports. Annual exports were up 15.3% over the same period in 1999,
driven by healthy international demand and a favourable exchange rate.
In fact, export performance has exceeded expectations from earlier this
year, which has prompted participants to revise projections for annual
exports upward. On the other hand, import growth was expected to be
subdued this year, since panellists did not anticipate aggregate demand to
recover as rapidly and strongly as it has in the first half of the year. As
a result, the trade balance surplus is expected to be significantly lower
than anticipated earlier this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Brazil. For more details please click here.
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