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Growth
pace quickens in Third Quarter. The National Statistical
Institute (IBGE) reported last month that the pace of economic activity
continued to quicken in the third quarter. The economy expanded 4.5%
in the third quarter over the same quarter in 1999, following the 3.7% and
3.4% expansions in the first and second quarter respectively. The
third quarter reading confirms that the Brazilian economy is set for a
healthy recovery from last year when the economy grew just 0.8%. The
government believes that the economy will expand 4.0% this year, driven by
strong export growth and a healthy recovery in industry.
The
manufacturing industry outperformed other sectors with annual growth of
4.5% in the third quarter, while services and agriculture grew by 3.8% and
2.2% respectively.
The strongest performance by sub-sector was observed in mining and
communications, which grew by 10.6% and 19.0% respectively over the same
quarter last year, while on the downside transportation and crop output
grew a modest 0.9% and 1.0% over the same period.
More
recent data point towards a further pickup in economic growth in the final
quarter of this year.
According to the Fundacação Instituto de Pesquisas Econômicas (FIPE),
the seasonally adjusted monthly indicator of economic activity (IMEC),
which monitors economic performance in São Paulo, was up 6.3% in October
over October 1999.
The FIPE data also show that lower national unemployment (6.8% in
October) combined with increased domestic credit availability and
declining interest rates appear to be driving a recovery in consumption.
In fact, the key consumption-related indicator of the IMEC
registered an 8.5% increase for the same period, while electricity
consumption grew 7.0% over October last year.
Industrial
production on healthy expansion path. October industrial
production data confirm that output growth remains strong. According
to IBGE, seasonally adjusted industrial production grew by 5.3% in October
over the same month last year, led by strong capital and durable goods
output, which were up 13.3% and 16.1% respectively. Intermediate
goods production rose 5.4%, while consumer goods output expanded by 3.0%.
However, industrial production growth appears to be levelling off, owing
to the higher comparison base last year. While the October growth
rate was slightly above the September rate of 5.3% it remained below the
strong growth rates registered between June and August. Growth is
expected to remain strong next year reflecting expectations that export
performance will be favourable and domestic demand will pick up further.
The
healthy rebound in industry, strong external sector, dropping unemployment
and resuming consumption has prompted panellists to maintain their
positive outlook for the economy this year, albeit slightly below the
government’s 4% growth estimate.
Furthermore, growth will remain healthy next year driven by a more
favourable interest rate environment and exchange rate developments that
will facilitate export growth.
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