The reason people are so worried about the economy is because the economy is bad. If all goes well, it’s natural for the topic to fall off the radar, as shown in the Genial/Quaest study released this Wednesday. When ranking Brazilians’ concerns, 15% of interviewees cited the economy, a far cry from the 38% who topped the list with security. The results reflect unexpectedly positive results in several indicators, including the September Monthly Service Survey (PMS) released today by IBGE, which recorded growth of 0.6%, beating market expectations. This is the eighth consecutive year of positive results, accumulating an annual increase of 3.3%. Service volume is 19.95% above pre-pandemic levels in February 2020, the best result in the series in the past.
This sector is fundamental. Services account for about 70% of GDP, and PMS covers half of this segment, but this segment is large and fragmented. The 1.2% growth in transportation is noteworthy and shows that other activities are also expanding. This performance provides encouraging data at the end of the third quarter and has already triggered an upward revision to economic growth forecasts, as highlighted in this blog.
Inflation also surprised me positively. The IPCA for October, released on Tuesday, changed by just 0.009%, lower than market expectations. Household food products fell by 0.16%, marking the fifth consecutive decline. Cheaper food makes household finances easier, especially for low-income households, and makes room for other types of consumption. In March, the outlook for inflation at the end of this year was 5.68%, but analysts now expect the IPCA to be just below the 4.5% target.
In addition to a scenario of low inflation and a hot job market due to historically low unemployment rates, financial markets are recovering strongly. Ibo Vespa broke its record for the 12th consecutive time yesterday, reaching 157,748 points. Over the year, the index increased by 30.4%. The dollar closed at 5.27 reais on Tuesday, its lowest in 17 months. Since the beginning of the year, the real has appreciated by 16.63% against the US currency. On December 30, 2024, 1 dollar was worth R$6.17.
There are several external factors that contribute to exchange rates. for example, shutdown However, there are also internal reasons that explain the improvement in Brazil’s indicators in various aspects of the economy. And it’s a very good thing to have a growing economy with low inflation, low unemployment, and that’s no longer the country’s main concern.
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