Brazil economic activity falls
October 20, 2016, 7:11 pm

Brazil’s economic activity has slackened for most of the third quarter, official data has shown [Xinhua]

Frustrating President Michel Temer’s efforts to pull the country out of a stubborn recession, economic activity plummeted in August, the IBC-BR index showed on Thursday.

The Central Bank’s IBC-BR which measures economic activity in Brazil’s farming, industry and services sectors, contracted 0.91 per cent in August.

In July, the figure was adjusted from a fall of 0.09 per cent to a fall of 0.18 per cent.

The disappointing data points to a persistent recession that requires more aggressive fiscal reforms.

The August drop is worse than expected and marks the biggest decline in 18 months.

Brazil’s official IBGE statistics provider attributed the decline in economic activity to a significant drop in retail sales, industrial output and services activity in August.

On Wednesday, the Central Bank cut its interest rate by 0.25 to reach 14 per cent – the first such action in nearly four years.

But it warned that it may make further such cuts if deflation persists amid expected austerity measures.

“The magnitude of monetary easing and a possible speeding up of its pace will depend on a favorable evolution of factors that allow greater confidence on meeting the inflation targets at the relevant horizon for the conduct of monetary policy,” the bank said.

Last month, Temer’s government announced a $17-billion austerity package comprised of tax increases and spending cuts.

Austerity measures were unpopular even during President Dilma Roussef’s administration because they greatly affect working class families.

One such measure proposed by the Temer administration is to delay public servants’ salary increases – a bold, if not tough act given Brazil’s very high inflation and unemployment rates.

The BRICS Post with inputs from Agencies