Reuters: US Dollar Report: UPDATE 2-Brazil economy growth disappoints again in 2nd quarter

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UPDATE 2-Brazil economy growth disappoints again in 2nd quarter Aug 31st 2012, 13:11 Fri Aug 31, 2012 9:11am EDT * Economy grows 0.4 pct in Q2 vs Q1, below forecast * Shrinking investment casts doubt on expected recovery * Farms did well, but exports and consumer activity weak By Silvio Cascione and Brian Winter SAO PAULO, Aug 31 (Reuters) - Brazil's economy disappointed again in the second quarter with growth of just 0.4 percent compared to the first quarter, and an abrupt decline in investment cast doubt on whether activity will pick up later this year as officials confidently predict. Exports and consumer spending were also unexpectedly weak, while a strong performance by the farm sector helped prevent the economy from shrinking, according to the data released on Friday by the government statistics agency IBGE. Gross domestic product had been expected to expand 0.5 percent on a quarter-on-quarter basis, according to the median forecast of 43 analysts polled by Reuters. The world's sixth-largest economy has been stagnant for the past year despite numerous tax incentives and other stimulus measures passed by President Dilma Rousseff's government. Economists have blamed the slowdown on uncompetitive industries, high business costs and a sour investment climate caused in part by the ongoing financial crisis in Europe. Some more recent data have indicated the economy started showing signs of life around June. Yet spending on capital goods -- a key measure of business investment -- shrank 0.7 percent compared with the first quarter and 3.7 percent versus a year earlier, indicating that companies harbored serious doubts about the vigor of the economy in months ahead. "The recovery of the economy is a mirage. The mirage is going to become reality, but it's still in the realm of wishful thinking," said Julio Gomes, a consultant for the Brazilian Institute for Industrial Development. Brazil's currency and interest rate futures markets largely shrugged off the data, focused instead on hopes that more monetary stimulus by the United States could be announced later this week. A DRAMATIC LETDOWN The long stretch of near-stagnant growth has been a dramatic letdown for an economy that until recently was one of the world's most dynamic hot spots among emerging markets. Brazil is poised to grow just 1.7 percent this year, a recent Reuters poll showed, lagging regional peers such as Mexico and Colombia. Industrial activity shrank 2.5 percent compared to the previous quarter, the IBGE data showed. Household consumption grew only 0.6 percent, while exports shrank 3.9 percent. Brazil's economy grew 0.5 percent in the second quarter when compared to the year-earlier period, IBGE said. That was below expectations of 0.7 percent growth, according to the poll. The agricultural sector grew a robust 4.9 percent compared to the previous quarter, thanks largely to better weather conditions and a strong harvest. That trend is expected to continue into next year, as Brazilian farmers reap the benefits of record prices for soybeans, corn and beef at a time when its main competitor -- the United States -- is experiencing a crushing drought. The IBGE also revised downward growth data from earlier this year. It said the economy grew only 0.1 percent in the first quarter from the fourth quarter -- compared to a previously reported 0.2 percent. Link this Share this Digg this Email Reprints

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