BRAZILIAN MACROECONOMIC OVERVIEW – NOVEMBER 2021 EDITION

Economic activity slows down but inflation does not

Recently released economic activity indicators confirmed our expectations of low growth in the third quarter, with negative results for commerce and manufacturing industry. The exception was strong performance in the services sector. Looking ahead, we believe that both domestic and external circumstances will become more challenging in 2022, although we expect commodity prices to remain high and international liquidity to also re- main above the historical average.

Accordingly, we have cut our expectations for economic activity in the fourth quarter and for 2022. We now expect GDP to increase 4.8% in 2021, down from 4.9%. For 2022, we have cut our forecast from 1.5% to 0.7%. As mentioned in the article “Cyclical GDP Decline in 2022,”1 present conditions, including a sharp rise in interest rates, justify lower cyclical GDP projections for next year, considering only the sectors most directly related to the economic cycle.

In line with these projections, leading activity indicators point to a more negative picture for industry and commerce, with the recovery that occurred up to the third quarter of 2021 losing steam. IBRE’s preliminary sur- vey results signal a particularly sharp slowdown in the goods sector. Until recently, the exception in this context of falling sector confidence was the services sector, which had been performing well at the end of this year. Ho- wever, it is now also starting to show signs of deterioration.

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Any opinions expressed by Fundação Getulio Vargas’s staff members, duly identified as such, in articles and interviews published in any media, merely represent the opinions of these individuals and do not necessarily represent the institutional viewpoints or opinions of FGV. FGV Directive No. 19 / 2018.