Santiago: Analysts covering Brazil’s economy raised their 2012 inflation forecast for the fifth straight week and cut their growth estimate as price increases show signs of accelerating even as the economy continues to sputter.
Brazil’s consumer prices will rise 5.11 per cent in 2012, according to the median estimate in a central bank survey of about 100 analysts published on Monday, up from the previous week’s estimate of 5 per cent. Gross domestic product will expand 1.81 per cent, the economists said, down from last week’s estimate of 1.85 per cent.
Annualised inflation accelerated to 5.2 per cent in July, reinforcing economists’ views that the central bank will miss its target this year. The bank targets price increases of 4.5 per cent plus or minus two per centage points. President Dilma Rousseff sees the recent uptick as temporary and based on factors such as weather events that have boosted agricultural prices in the US and Brazil, a government official said on August 10.
“You have food price inflation and you have a commodities price shock,” Bret Rosen, a Latin America strategist at Standard Chartered Bank, said in a telephone interview from New York. “Clearly that’s not the direction you want to be going in. Lower GDP and higher inflation is not the best combination.”
Since last August, policy makers led by central bank President Alexandre Tombini have cut the benchmark Selic rate by 450 basis points to a record low 8 per cent to spur growth in the biggest emerging market after China. The government has also cut taxes and boosted lending by the state development bank BNDES. Last week, Finance Minister Guido Mantega met with executives from private banks such as Itau Unibanco Holding SA and pressed them to increase credit.
Traders expect Tombini to cut the Selic by up to 75 basis points by October before raising it early next year.
Brazil’s industrial production in June fell 5.5 per cent from a year prior. Consumer confidence fell in the same month to its lowest level since September. The country’s gross domestic product grew at a 0.8 per cent annualized rate in the first quarter, less than half the rate of the US
The central bank forecasts growth of 2.5 per cent this year, down from 2.7 per cent last year and 7.5 per cent in 2010. Low unemployment and real wage increases will help drive Brazil’s GDP growth to a 4 per cent annual rate by year-end, Tombini told reporters in late July.
Economists in the survey predicted inflation of 5.50 per cent and growth of 4 per cent next year, both unchanged from the previous week.