LatinNews Daily Report - 17 August 2012

ECONOMY | Green shoots? Three new indicators suggest that the Brazilian economy is beginning to respond to the official fiscal and monetary stimuli put in place by the government and the central bank to prevent the current cyclical slowdown becoming entrenched. Retail sales rose 6.1% month-on-month and 9.5% year-on-year in May on the back of tax breaks for manufactures and consumers in selective key sectors like the car industry. There was a 16.4% increase in sales of vehicles and auto parts in May, while furniture and home appliance retailers also reported a strong month. Net job creation recovered in July to 142,500, up 1.4% year-on-year, after two months of annual contractions.  Job creation is still dominated by services, but in July there was also growth in employment in agriculture, civil construction and even the struggling manufacturing industry. Finally, and most notably, the index of industrial confidence rose 2.2% in August to 54.5 points. In response to the latest indicators, local economists revised up to +0.8% from 0.5% (month-on-month) their estimates for the central bank’s latest (June) economic activity index (IBC-Br), a GDP proxy, due out today 17 August. Brazil’s finance minister Guido Mantega insists that real GDP growth will rebound to about 4.0% in annual terms by year-end, however the central bank’s international affairs director Luiz Awzau Pereira da Silva told a São Paulo seminar on 16 August that the recovery is slower than expected, projecting a rebound in annualised growth of 3.2%-4.0% by year end.

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