|
Slowdown in final quarter
confirmed as industry slows further amidst rationing
Fourth quarter gross domestic product (GDP)
data confirmed that the economy entered into recession in the final
quarter last year. GDP contracted 0.1% over the same quarter the year
before, which was down from 0.5% growth registered in the third quarter
but slightly more favourable than the 0.3% contraction expected by the
Consensus in last month’s publication. The final quarter figure brought
down annual growth in 2001 to 1.5%, a substantial slowdown when compared
to the 4.4% growth rate registered in 2000. Last year’s deceleration was
prompted principally by a 0.6% contraction in industrial activity, as
firms were required to cut back output as a result of the energy rationing
programme adopted in the first half of last year. Meanwhile, both
agricultural activity and services remained in positive territory with
growth rates of 5.1% and 2.5% respectively. Within industry, construction
experienced the strongest contraction in the third quarter of 8.3% over
the same quarter in 2000, down from a 2.7% drop year-on-year in the third
quarter. Mining dropped by 4.1% (-2.3% yoy in Q3) and manufacturing
output declined 3.4% (-0.3% yoy in Q3). Fourth quarter activity in the
services sector received a strong boost from the communications sector,
where growth reached a healthy 10.3%. Nevertheless, activity slowed to
+1.8 yoy growth from 2.1% in the third quarter.
Even though aggregate demand and supply data
have not yet been released, proxy indicators show that domestic demand
dropped off notably towards the end of the last year. According to IBGE,
national retail sales dropped 2.4% in December over the same month in
2000, following a 1.9% decline in November. The December figure brought
the annual contraction in retail sales to 1.3%. Consensus data show that
consumption is likely to have dropped 2.4% in the final quarter of last
year over the same quarter in 2000, following a 2.1% drop in the third
quarter. Nevertheless, the sound growth registered in the first half of
2001 is likely to have bolstered the annual growth rate to a modest 0.8%.
Even so, last year’s consumption data indicate that high interest rates,
deterioration in the exchange rate and tighter credit conditions
restrained consumption growth, since the annual rate remained well below
the solid 5.6% expansion registered in 2000.
Investment also seems to have slowed in the
final quarter of last year as the negative growth trend in capital goods
output that began in September persisted through the end of the year.
Capital goods production dropped 3.5% in December over the same month the
year before, the first contraction observed in 22 months. Double digit
growth rates in the first eight months of the year, however, managed to
boost the annual growth rate in capital goods production, which remained
at a healthy 12.7% in 2001. Trade data confirm the downward trend in
investment towards the end of the year. According to the Ministry of
Development, Industry and Trade, capital goods imports dropped by 21.9% in
December over the same month in 2000, which was down significantly from
the 5.4% contraction recorded in November. Nevertheless, Consensus
participants see investment growth to have remained in positive territory
last year with a growth rate of 2.9%, compared to 4.5% growth in 2000.
Panellists expect the economic slowdown to
persist through the first quarter of this year. However, economic growth
will resume in the second quarter and pick up notably in the second half
of the year. The acceleration in the second part of this year will help
lift the annual growth rate, as the declining interest rate setting and an
improved export environment provide a backdrop for recovery. This month’s
Consensus figure for growth this year is down notch over last month’s
publication but still remains 0.3 percentage points above the growth rate
expected in December of last year.
|
