Brazil Posts Modest Second-Quarter Growth, Central Bank Index Shows

• Brazil's economy expanded just 0.2% in the second quarter from 1.1% in the first quarter, a central ​bank indicator showed on Monday, signalling a loss of ‌momentum from the year's strong start, particularly in the all-important services sector.
• The IBC-Br economic activity index, viewed by markets as a proxy for gross domestic product, ​fell 0.6% in June from the previous month, also on ​a seasonally adjusted basis. Economists polled by Reuters had ⁠expected a 0.53% contraction.
• Central bank data showed that the positive quarterly reading for the IBC-Br was driven mainly by industry, which expanded ​0.5% from the previous quarter. Agriculture rose 0.3%, while services, the ​backbone of Brazil's economy, shrank 0.1%. The index is compiled using the central bank's ‌estimates ⁠for those sectors, along with projections for taxes linked to production, which increased 0.1% in the second quarter from the preceding three months.
• The second-quarter slowdown was widely expected. The Finance Ministry has said it ​anticipated softer growth ​as the effects ⁠of government support measures faded following a series of credit-boosting initiatives announced by leftist President Luiz Inacio ​Lula da Silva ahead of his October re-election bid.
• Restrictive ​borrowing ⁠costs have also weighed on economic activity. Although Brazil's central bank began an easing cycle in March, interest rates remain among the highest in real ⁠terms ​globally, at 14%, as policymakers seek to ​bring inflation, which stood at 4.44% in the 12 months through July, back to the ​official 3% target.

(Source: Reuters)