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Credit
eases amid more favourable interest rate setting
Private consumption is showing a similar pattern of improvement but
remains subdued. National retail sales dropped 0.3% in November over
the same month the prior year – a considerable improvement when compared
to the 2.2% and 3.0% declines observed in September and October
respectively. Declining unemployment, lower interest rates and a
stronger exchange rate are likely to bolster a consumption rebound in the
coming months. Private banks already raised lending levels notably
in December. Officials say that lending reached its highest point in
almost three years, as successive monetary easing has reduced financing
costs for consumers. In December, private bank lending rose 1.3%
over the previous month. Furthermore, total loans were up 3.8% over
the same month the prior year.
According
to the Economic Research Institute (FIPE, Fundação Instituto de
Pesquisas Econômicas), economic output in São Paulo declined 1.1% in
November over the same month in 2002, as measured by the monthly indicator
of economic activity (IMEC, Indicador de Movimentação Econômica).
The November figure represented a worsening when compared to the modest
0.1% expansion observed in the previous month and shows that the economy
has not yet entirely pulled clear from recession. Nevertheless, the
key consumption related indicator of the IMEC, remained in positive growth
territory with a 0.1% expansion.
The
government is confident that the incipient signs of recovery observed in
the final quarter of the year will take a firmer grip on the economy
throughout this year, which should help lift gross domestic product (GDP)
growth to 4.0%, which is a notch above the Central Bank’s and the
Consensus Forecast’s 3.5% estimate for this year.
Current
account registers first surplus in ten years amid strong export drive
The current account balance registered a surplus of US$ 265 million in the
final quarter of last year. The surplus exceeded expectations of a
US$ 1.1 billion deficit but was above the US$ 263 million deficit observed
in the fourth quarter of 2002. The improvement over last year’s
current account deficit was attributable to the lower higher trade surplus,
which increased from US$ 5.3 billion in the fourth quarter of 2002 to US$
7.0 billion. Strong export growth of 21.2% bolstered the trade
surplus, as subdued domestic demand contained import growth at a modest
2.2%. The fourth quarter current account figure raised the annual
current account surplus to US$ 4.1 billion (0.8% of GDP), which contrasted
with the US$ 7.7 billion deficit in 2002 (1.7% of GDP). Consensus
Forecast participants expect the current account surplus to revert to a
deficit this year, as the stronger exchange rate is likely to delay a
repeat of last year’s strong export performance, while growing domestic
demand will raise imports considerably. The resulting narrowing of
the trade surplus is seen as closing the current account gap, which is
seen with a deficit of US$ 2.4 billion by year-end (0.4% of GDP). |
