Other December indicators appear to confirm this trend. Retail sales were flat on a monthly basis (though still posting strong overall growth of 10.9% in 2010), while state and non-state bank lending expanded 1.6% in the month (R$1.7trn), the slowest increase since July. Further measures towards the year's end, including an increase in bank reserve requirements in December, plus another Selic increase in January (to 11.25%), and the latest R$50bn (US$30bn) in budget cuts, will wind their way through the economy in the first half of 2011. The government is thereby hoping to steer Brazil to a soft landing, but for now inflation pressures remain very much at the fore.
In the latest 'Focus' consensus report compiled by the central bank, local economists raised their 2011 inflation forecast for a tenth straight week, to 5.75%, and also raised their 2012 forecast to 4.7%, up from 4.61% the previous week. This signals that inflation expectations are becoming entrenched, although it is worth noting that the IPC-Fipe index of consumer prices in Brazil's largest city, São Paulo, rose 0.95% in the second week of February compared with 1.12% in the first, on slower growth in food and transport costs. The Rousseff government is anxious that congress approves its minimum wage proposal for the year, so as to put a lid on inflation pressures and signal to the markets that it means business. And while Mantega talks of a deceleration, he still expects robust real annual GDP growth of 5.0% in 2011, making Brazil the envy of most developed countries.
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