brazil economic focus | june 2016

June 2016

Bruno PomeranzBruno.pomeranz@fco.gov.uk

Brazil Economic Focus: Monthly Chart Pack

OFFICIAL1

2

1. Lagging indicators continue to show economic deterioration

UNCLASSIFIED

Real wages falling and unemployment rising

Apr-15

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

1,920

1,940

1,960

1,980

2,000

2,020

2,040

0

2

4

6

8

10

12

Labour Market

Unemployment (%) Average real income (R$)

4

2. But some of them might have reached the bottom

UNCLASSIFIED

*Jun 2005 = 100

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

78

80

82

84

86

88

90

92

94

Industrial Employment*

Industries have stopped dismissing…

*Index number seasonally adjusted

Apr-15

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

80

82

84

86

88

90

92

94

Industrial Production*

...and their production stopped declining

*Index number seasonally adjusted

Apr-15

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

100

102

104

106

108

110

112

114

Retail Sales Index*

While retail sales maintain a regular trend

3. Leading indicators show that growth may resume soon

8OFFICIAL

Perception of Brazil has improved with the change in the government

Jan Feb Mar Apr May Jun300

350

400

450

500

550

5-Years Credit Default Swaps (base points)

Confidence indexes have shown increase

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-1689

90

91

92

93

94

95

Compound Leading Indicator of the Economy (IACE)*

*(IACE) includes Ibovespa points, several confidence indexes, exports, trade terms, and production of durable goods (index number 2010 = 100)

Employment is expected to increase in the future

*Index number seasonally adjusted (Jun 2008 = 100)

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

60

65

70

75

80

85

Leading Employment Indicator*

Industrials feel more confident about the economy

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-162830323436384042444648

Industrial entrepreneur confidence index*

Brazil Sao Paulo

*The Index range is from 0 to 100. Values higher than 50 indicate positive evolution of the indicator

Consumers are willing to spend more

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

94

96

98

100

102

104

106

Consumer Expectation Index*

* Fixed base index

Helping to recover confidence in the services sector

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

64

66

68

70

72

74

76

Services sector confidence index (index number)

While exchange rates continue to boost exports

Jan-16 Feb-16 Mar-16 Apr-16 May-1610

11

12

13

14

15

16

17

18

3.103.203.303.403.503.603.703.803.904.004.10

Exports & Exchange Rate

US$/BRL Exports (USD billion)

4. Forecasts show a better outlook for the future

16OFFICIAL

Inflation decreases

May-15

Jun-15Jul-1

5

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Inflation % (cumulative 12 months)

Market projects lower interest rates in the near future...

Jan Feb Mar Apr May Jun11.011.512.012.513.013.514.014.515.015.5

Future Interest Rates (%)

SELIC for December 2016 SELIC for June 2017

...and foresees a lower downturn in 2016

Jan Feb Mar Apr May Jun

-4.1

-3.9

-3.7

-3.5

-3.3

-3.1

-2.9

Projections for GDP Growth in 2016*

*Focus Research

Key Macroeconomic Indicators

Monthly Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16

Inflation (12 mth. accum.) 10.67 10.71 10.36 9.39 9.28 9.32

Benchmark Interest Rate 14.25 14.25 14.25 14.25 14.25 14.25

Unemployment (%) 9.72 9.93 10.00 10.20 10.62 10.8%

Trade Balance (US$ bn.) 6.2 0.9 3.0 4.4 4.8 6.4

Exports (US$ bn.) 16.8 11.2 13.3 16.0 15.4 17.5

Imports (US$ bn.) 10.5 10.3 10.3 11.6 10.5 11.1

Quarterly 2016 Q1 Q2 Q3 Q4

GDP (% var. QoQ) -0.3