SAO PAULO, Sept 16 (Reuters) – Economic activity in Brazil fell by a seasonally adjusted 0.2% in July from the previous month, a central bank index showed on Wednesday, compared with expectations for a 0.1% contraction in a Reuters poll of economists.
• Latin America’s largest economy has been cooling as elevated borrowing costs weigh on activity.
• July marked the second consecutive month of contraction following a revised 0.9% drop in June.
• Brazil’s central bank has lowered its benchmark interest rate by 25 basis points at each of its last four meetings, bringing it to 14%, but the country’s real rates remain among the highest in the world.
• Policymakers at the bank will announce their next rate decision later on Wednesday, with economists in a Reuters poll forecasting another 25 bp cut to 13.75%.
• “The growth data increasingly argue for lower rates; the inflation backdrop argues for getting there gradually,” said Andres Abadia, Pantheon Macroeconomics’ chief Latin America economist.
• The central bank’s IBC-Br index, seen as a proxy for gross domestic product, showed that the agricultural sector was the main drag in July, posting a 1.2% decline.
• Industry fell 0.4%, while services – the backbone of Brazil’s economy – were flat.
• On a year-on-year basis, the IBC-Br index was up 1.1% in July.
(Reporting by Gabriel Araujo, Editing by Louise Heavens, Kirsten Donovan)
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