Brazil's Q3 GDP shrinks by a record 4.5% y/y in Q3

Wednesday, December 02, 2015

Brazil’s economy shrank by a record 4.5% y/y in Q3 as worries that the largest economy in Latin America would slip into the worst recession since the 1930’s compounded. The Brazilian economy has faced significant headwinds from lower commodity prices, falling consumer credit growth and a largescale fiscal contraction which have all materialised into a perfect storm. Adding to this the anti-corruption investigations into Petrobras and now BTG Pactual it seems more and more pressure is mounting on President Dilma Rousseff to steady the ship. Worryingly, the declines are not confined to just a handful of sectors, and while commodity prices have come under significant pressure throughout the year, industrial production and retail sales have also deteriorated as consumers lose confidence and with unemployment rising to 7.9% in October, the highest level since 2009, it seems unlikely that policymakers will be able to engineer a quick turn around and the Brazilian economy looks set for more tough times ahead.

Front month Brent futures dropped for the fourth straight session yesterday as investors positioned themselves ahead of this week’s OPEC meeting. The global benchmark traded tentatively lower after struggling to hold onto intraday gains back above $45/bbl, ending the session at $44.44/bbl. With many analysts predicting the group will maintain output and a stronger dollar adding further downward pressure to crude prices we could see Brent futures experience further downside moves, revisiting the lows seen in August as the fundamental outlook shows little sign of improving in the near term.   

An engaging session for economic data today with eurozone inflation data expected out later this morning while over in the US investors will have ADP employment change, EIA crude stocks and the US Fed Beige Book to look forward to. With the ECB meeting tomorrow and expected to embark on additional stimulus measures and the FOMC due to meet later this month to (hopefully) raise interest rates in the US, investors will be scrutinising every piece of economic data in the run up as they try and gauge policymaker’s outlook.  

Brazil's Q3 GDP drops 4.5% y/y in Q3

BZGDYOY Index Brazil GDP Yoy 1 2015 12 02 07 56 48

Brent prices trade under pressure ahead of OPEC

CO1 Comdty Generic 1St CO Fut 2015 12 02 08 13 40

Events for today

1000

EZ

Oct

CPI

1000

EZ

Oct

PPI

1315

US

Nov

ADP Employment Change

1530

US

w/e

EIA Crude Oil Stocks

1900

US

n/a

U.S. Fed Beige Book

Topics: Brent, OPEC
More from: Kash Kamal