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2h ago

Brazil’s Activity Gauge Points to Q3 Contraction as Inflation Outlook Improves

Focus forecasts put 2025 inflation at 4.46% after October’s electricity‑led IPCA drop.

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Overview

  • The central bank’s IBC‑Br fell 0.24% in September and declined 0.89% in the third quarter, marking the first quarterly setback for activity in two years.
  • Sector data signal broad softness in Q3, with agriculture down 4.5%, industry down 1.0% and services down 0.3%, according to the BC’s breakdown.
  • Market expectations for 2025 IPCA moved below the 4.5% ceiling after an October print of 0.09%, heavily influenced by a 2.39% drop in residential electricity prices.
  • The Selic stays at 15% and Copom has not ruled out further increases, while DI yields climbed on profit‑taking, low liquidity and global risk aversion.
  • Investors look to IBGE’s official Q3 GDP on 4 December and to U.S. releases and Fed guidance, as Japan’s preliminary Q3 GDP showed a 0.4% quarterly decline (−1.8% annualized).