Bank of America indicator for economic activity in Brazil falls in October

A coincident indicator of the Bank of America for the Brazilian economic activity it fell for the sixth consecutive month in October, going into even more negative territory, and the bank’s assessment is that the pace of recovery will continue to weaken amid heated inflation, higher interest rates and political noise.

The index dropped to -0.34 points last month, informed the BofA this Monday (8) to its lowest level since July 2020 and compared to -0.19 points in September. The reading at the end of the third quarter was the first with a negative sign since 2020.

“The drop in our indicator points to a slow start to the last quarter of the year,” said David Beker, economist and strategist for Brazil at BofA, in a report, explaining that his index is a good predictor of the IBC-Br’s movements. This, in turn, is an indicator released by the Central Bank that helps delineate the trend in the direction of the Gross Domestic Product (GDP).

BofA pointed out that it still projects an increase of 5.2% of the Brazilian GDP in 2021, but that “the pace of the recovery should continue to lose steam ahead, given high inflation, higher interest rates, growing political noise and scarcity of inputs”.

Among the components of the BofA index, the most negative contribution in October came from auto sales, which sank to -0.48 points from -0.42 points in the previous month.

Consumer confidence and money supply readings also saw declines last month, while the index measuring business confidence remained unchanged.

O IBGE releases third quarter GDP on December 2nd. Before, on November 16, the BC informs the September IBC-Br.