growth remains strong in third quarter
In the third quarter, gross domestic product (GDP) expanded 6.1% compared
to the same quarter last year. The third quarter reading exceeded
Consensus Forecast expectations, which had economic activity picking up at
a lesser 4.6% pace and followed on a 5.6% expansion registered in the
second quarter. Seasonally adjusted data confirm the strong third
quarter rebound, as activity picked up 1.0% over the prior quarter, down
moderately from the 1.4% expansion observed in the second quarter.
and exports bolster activity
Investment activity accelerated, from the 13.4% expansion in the second
quarter to 20.1% in the third, despite a less favourable monetary setting.
Exports rose a very strong 18.1% over the third quarter last year, which
was up slightly from the already robust 17.6% annual expansion observed in
the previous quarter. Imports registered more moderate but solid
growth of 17.7% for the same period (Q2: +14.2% year-on-year).
consumption growth bolsters domestic demand further
Domestic demand accelerated from the 5.6% growth observed in the second
quarter to 7.6% in the third. In addition to the strong investment
push, consumption also contributed to the healthy acceleration in domestic
demand, as private consumption grew 5.7% over the same quarter last year
(Q2: 4.5% year-on-year). Public consumption expanded only 0.4%,
which was down from the 0.8% pickup observed the previous quarter.
commerce and manufacturing drive economic rebound
Growth was strongest in construction, commerce and manufacturing.
Construction activity accelerated to 11.6% growth in the third quarter
from a 6.9% expansion registered in the prior quarter. Similarly,
commerce also experienced a strong acceleration in activity, as growth
rose from 8.9% in the second quarter to 10.4% in the third. Finally,
despite the healthy growth pace of 6.6% in the third quarter,
manufacturing activity actually decelerated from 6.9% growth in the second
quarter, confirming a trend of moderating growth observed since the first
quarter of this year.
upgraded amid stronger third quarter
Consensus Forecast participants have adjusted their growth estimate for
this year upward by 0.2 percentage points from last month, in line with
the stronger than expected growth observed in the third quarter. The
economy is now expected to grow 4.7%, which is well ahead of the
government’s 3.5% forecast. The successive monthly hikes by the
Central Bank since September have the benchmark SELIC interest rate 125
basis points above its August level. The tighter monetary setting is
likely to curtail the current healthy economic expansion in the coming
months. In fact, Consensus Forecast participants expect growth to
slow in the final quarter of the year to 4.3%. The deceleration is
likely to carry over into next year and will lower the GDP expansion in
2005 to 3.5%.