GDP survey shows stagnant economy

The economic activity fell 1.4% in January compared to December, according to GDP Monitor — an indicator calculated by think tank Fundação Getulio Vargas (FGV) to measure the monthly evolution of the economy, unveiled on Monday.

Claudio Considera, the economist in charge of the readings, says that the result indicates stagnation in the economic activity in early 2022. This is because there are no signs of robust reaction in key segments of the economy, such as household consumption and services economy — the latter representing more than 70% of the GDP.

According to him, Brazil does not have, at the moment, conditions for sustainable growth this year, and is expected to end up with a variation close to zero in the GDP in 2022, compared to last year. “We have today a perfect picture of a totally stagnant economy,” the specialist said.

FGV also unveiled that, in the GDP Monitor, the economy grew 1% in the moving quarter ended in January, compared to the one ended in October 2021. Compared to January last year, the economy grew 1.2% in January this year, with expansion of 2% in the quarter ending in January, compared to the same period in the previous year.

Mr. Considera said, however, that those increases are favored by the low base of comparison, referring to last year, and do not represent the economy accelerating at the beginning of 2022.

This is because the faster advance of vaccination against Covid-19 only happened in mid-2021, when the gradual reopening of the economy began to take place, as people went back to work and restrictions on circulation were eased. Immunization against the disease started in Brazil only in January last year — a month in which the economy, especially in the commerce and service sectors, was operating at a weak pace, hampered by the pandemic, and was strongly affected by social distancing measures designed to contain contagion.

On the demand side, one factor that help form the current moment of weaker activity is the weakening of household consumption at the beginning of the year, Mr. Considera said. In the GDP Monitor, in January, household consumption fell 1.3% compared to December last year.

There was an increase of 2.2% compared to January 2021, but the analyst said that the use of a low base of comparison influenced upwards the high results seen in the indicator in January 2022. In the moving quarter ended in January versus the one ended in October, household consumption grew only 0.8%.

“Household consumption is falling, and now with higher inflation it will be even harder to grow,” he noted, adding that higher inflation leads to lower real household income. “We are not seeing any sign of improvement [in family consumption],” he said.

Another aspect Mr. Considera mentioned was the Russia-Ukraine war, which has led to a surge in the price of oil abroad and to increases in fuels in Brazil. As long as the war goes on, the price of a barrel of oil in the foreign market may remain high, making prices soar in the Brazilian domestic market, he said.

On the demand side, the services sector is not showing good signs on the margin either. In January, this activity fell 1.7% compared to December last year in the GDP Monitor.

According to Mr. Considera, the factors at the moment indicate that the country does not show the necessary conditions to grow above 1% a year in 2022. “I don’t see conditions to strongly grow this year. We are expected to have a very weak growth of 0.6%, 0.7% [in the 2022 GDP],” he said.

Source: Valor International

https://valorinternational.globo.com