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GDP Should Fall Between -0.2% and -0.5% in the Quarter, Due to Seasonal Adjustment and Loss of Dynamism. Economists Adjust Projections.
This Tuesday (5), IBGE will release the National Accounts data, which should confirm the stagnation of economic activity in the third quarter of 2023 compared to the second quarter. The expectation of economists and the analysis departments of major banks is for a retraction between -0.2% and -0.5% for the **GDP** of the 3rd quarter, on a quarterly basis. The weakening of agricultural activity and the stumbling services during the period are responsible for the behavior.
Despite this, the projections indicate that the **economy** is still expected to grow between 1.7% and 1.9% compared to the same period of 2022. The National Accounts figures are essential for understanding the performance of the **Gross Domestic Product** and its contribution to the country’s economic growth.
Forecasts for the GDP of the 3rd Quarter
The forecast of Andrea Damico, chief economist at Armor Capital, is similar. She expects -0.3% in the quarter-on-quarter comparison but a rise of 1.7% in the year-on-year comparison. She notes that this estimate has worsened over the months, as Armor was working with a quarterly decline of -0.1%, but retail, services, and industry activity data surprised mostly to the downside during the period.
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The economist projects that a slowdown in services should show stability, while the industry will have a
breather
, growing by 0.5%.
What will contribute most to the drop (in GDP) is exactly agriculture, which should give back part of the increase from the first quarter
, she said.
New Projections for the GDP
Andrea also projects that investments should remain practically stable and that government consumption should have accelerated in the quarter, in addition to a positive contribution from the external sector.
Armor Capital is also expecting that the revision of previous GDP data, which will also be released this Tuesday, will lead to some type of adjustment of the projections for the year, currently held at 3.1% in 2023 and 1.9% in 2024.
For XP, the estimate is a decline of 0.2% in the GDP of the 3rd quarter,
reflecting mainly the dissipation of the positive shock from agriculture and the slowdown in domestic demand during the period
. In comparison with the 3rd quarter of last year, the estimate is for a growth of 1.8%.
Impacts of the Economy in the Last Quarter
In a report, it was commented that after strong expansion in the first half of the year, GDP seems to have lost momentum in recent months.
We forecast growth of 2.8% in 2023 and 1.5% in 2024.
For Genial Investimentos, the scenario is one of loss of dynamism in the Brazilian economy starting in the second half of the year, due to still restrictive monetary policy and a high degree of uncertainty regarding economic performance in the coming months, especially due to high fiscal risk.
Projections for Industry and Services Sector
The projection from Itaú BBA is that the GDP of the 3rd quarter has fallen by 0.2% on a quarterly basis, with seasonal adjustment. In the year-on-year comparison, the expectation is for an advance of 1.9%. The bank states that one of the highlights will be the confirmation of the slowdown of the services sector, which is expected to show an annual increase of 1.3%, well below the 2.3% reported in the 2nd quarter.
Agricultural GDP is also expected to slow down, dropping to an annual growth of 9.4%, compared to a high of 17.0% in the previous quarter.
Finally, we expect a year-on-year increase of 1.8% in the industry, compared to 1.5% between April and June
, according to the bank’s analysis.
Various Aspects of the Economy and the GDP
According to the services sector, the category of
other services
, which includes services provided to families, is expected to show an increase of 1.5% in the year-over-year comparison, compared to a 2.4% increase in the 2nd quarter,
showing still some resilience, given that the labor market remained heated
.
For commerce, the projection is for almost stability (-0.1% in the annual metric), a result very similar to what was observed in the months of April to June.
It is worth highlighting the ‘transport services’ component, which recorded a strong increase in the first quarter, benefited by the strong performance of agribusiness, but is expected to lose strength over the last months of the year
, the Itaú report says.
The loss of strength in agricultural GDP will be mainly due to the diminishing significance of the soybean harvest in accounting for the sector’s results in the second half of the year.
Projections for Industry and Aggregated Demand
For industrial GDP, the estimate is a rise of 1.8% in the year-over-year comparison, compared to a growth of 1.5% in the second quarter, driven by the extractive sector, which has a projected increase of 7.8%.
The negative highlight will be the transformation industry,
which is expected to decline by 0.7%, due to weak demand and high levels of inventories, and for construction, amidst a drop in the production of typical inputs and a slowdown in the wage mass in the sector.
.
On the side of aggregated demand, Itaú still sees strong data in family consumption and exports.
Regarding the former, we estimate an increase of 2.6% compared to the same period last year. The resilience of the labor market has mainly sustained household spending on services
, the bank explained.
Forecasts for the GDP and Market Analysis
For exports, the annual growth estimate of 10% made by Itaú was influenced by the harvests of the period, as well as by the strong performance of the extractive oil industry. Gross fixed capital formation, on the other hand, is expected to continue recording an annual decline, due to the retraction of both domestic production of capital goods and imports.
For Santander Brasil, the expected contraction is 0.4% in the GDP of the third quarter, a downward revision from the previously expected decline of 0.3%.
If our projection is correct, this would imply the first negative result in quarterly variations since the 2nd quarter of 2021.
.
Recently, FGV/Ibre anticipated in its GDP Monitor that household consumption is expected to present its ninth consecutive positive variation in the third quarter (the projection is 2.5%, although at a slower pace than in previous quarters). The report states that this demonstrates the great resilience of this component, despite the environment of high-interest rates and high levels of household indebtedness.
For André Nunes de Nunes, chief economist at Sicredi, a slight retraction in the GDP for the quarter is expected, of -0.1%.
On the supply side, it will weigh a retraction in Agriculture (-1.7%) after a very strong first semester. On the demand side, we expect a decline in investments of (-2.0%), largely due to the effects of the restrictive interest rate cycle.
Source: Info Money
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