Central Financial institution: ‘Preview’ of GDP signifies a 0.57% enhance within the 2nd quarter and exhibits a slowdown within the financial system

GDP is the sum of all goods and services in the country and serves to measure the evolution of the economy; official data will be released by the IBGE in September. In the 1st quarter, there was an increase of 1.11%.

The Central Bank reported this Monday (15) that the Economic Activity Index (IBC-Br), considered the “preview” of the Gross Domestic Product (GDP), indicated a rise of 0.57% in the second quarter of this year.

GDP is the sum of all goods and services produced in the country and serves to measure the evolution of the economy. The official result for the period, measured by the Brazilian Institute of Geography and Statistics (IBGE), will be released in September.

If the GDP grows, it means that the economy is doing well and producing more. If GDP falls, it means the economy is shrinking. That is, consumption and total investment are lower.

The data released this Monday by the Central Bank shows slowdown of the Brazilian economy in the second quarter of this year. This is because, in the first quarter, the IBC-BR grew 1.11% (revised data) — see in the chart below.

The slowdown in the second quarter was already expected. During the period, there were:

The result by the BC was calculated after seasonal adjustment — a kind of “offset” to compare different periods. The comparison was made with the first three months of 2022.

1st quarter result

Driven by the service sector, GDP grew by 1% in the first quarter of this year, according to the IBGE (in the revised data, 1.11%).

This was the third positive result in a row, after the drop recorded in the second quarter of 2021.

After the fall recorded in 2020, due to the effects of the Covid-19 pandemic on the economy, GDP grew by 4.6% last year.

For this year, financial market economists project an expansion of around 2%.

Other data

According to the Central Bank, in June this year, in comparison with the previous month, the IBC-Br registered an expansion of 0.69%. As a result, a two-month run of decline was interrupted.

In the first half of this year, according to the Central Bank, the level of activity in the Brazilian economy recorded an expansion of 2.24% (without seasonal adjustment).

According to the Central Bank, the indicator grew by 2.18% in the 12 months through June. In this case, the index was also calculated without seasonal adjustment.

GDP X IBC-Br

The results of the IBC-Br are considered the “preview of GDP”. However, the Central Bank calculation is different from the IBGE calculation.

The BC indicator incorporates estimates for agriculture, industry and the service sector, in addition to taxes, but does not consider the demand side (incorporated in the IBGE’s GDP calculation).

The IBC-Br is one of the tools used by the BC to define the country’s basic interest rate. With lower economic growth, for example, there would theoretically be less inflationary pressure, which could contribute to easing interest rates. The base interest rate currently stands at 13.75% per annum, the highest level in six years.

Source: G1