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Brazil Economy Rebounds More Than Expected in October

Brazil’s economic activity rebounded more than analysts expected in October, as government stimulus measures fueled demand in the world’s second-biggest emerging market.

The seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.36 percent in October after declining 0.52 percent in September, the central bank said today in a report posted on its website. Analysts expected a 0.30 percent increase, according to the median estimate from 23 economists surveyed by Bloomberg. The non-seasonally adjusted index rose 4.96 percent from a year ago.

President Dilma Rousseff’s administration has expanded stimulus measures for companies and consumers to jump-start Brazil’s $2.5 trillion economy, which grew at half the pace of analysts’ forecasts in the third quarter. Last week government officials cut taxes for the construction industry and announced plans to attract billions of reais in port investments. Since August 2011, authorities have also increased public spending, reduced taxes on consumer goods and cut benchmark interest rates to record lows.

“The October number reflects more favorable broad retail sales and industrial production in the period,” Banco Bradesco SA said in an e-mailed statement signed by chief economist Octavio de Barros. “This reinforces signs of acceleration in economic activity at the start of the fourth quarter.”

Slower Pace

Brazil’s gross domestic product grew 0.6 percent in the third quarter, according to the national statistics agency, as investment fell for the fifth straight period. The economic activity index showed expansion of 1.14 percent in the quarter, fueling expectations that the economy was growing faster than it did.

Government measures have been slow to gain traction in some areas of the economy. Sales of vehicles in November fell 8.7 percent from October. Consumer default rates in October remained at the highest level since November 2009, even as bank loan rates stood at record lows.

Still, manufacturing may be accelerating, as industrial production in October grew at an annual basis for the first time since August 2011. Retail sales in October rose at the fastest pace in three months on higher sales of computers, furniture and appliances. Consumer confidence reached its highest level in November since December 2010.

Price increases have gained speed even as economic growth has remained sluggish. Annual inflation through November accelerated to 5.53 percent from 5.45 percent a month earlier on higher service costs. Central bank President Alexandre Tombini reiterated on Dec. 11 that inflation will converge to the bank’s 4.5 percent target next year.

Brazil’s economy expanded 2.7 percent last year, down from 7.5 percent in 2010. Finance Minister Guido Mantega said last week the government is maintaining its forecast for growth of at least 4 percent next year.

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