SAO PAULO
Brazil’s President Dilma Rousseff speaks at a joint news conference with European Council President Herman Van Rompuy and EU Commission President Jose Manuel Barroso (unseen) during an EU-Brazil summit in Brussels February 24, 2014.
Credit: Reuters/Francois Lenoir
SAO PAULO (Reuters) – Brazil’s economy ended 2013 on a positive note thanks to strong consumer spending and investment, providing a much-needed boost to President Dilma Rousseff as she tries to rebuild her credibility with investors and win reelection in October.
Gross domestic product expanded 0.7 percent in the fourth quarter compared to the third quarter, the government statistics institute said on Thursday. That was more than twice the amount expected by economists, and it pushed the economy to 2.3 percent growth on an annual basis for the full year of 2013.
Such growth is a far cry from the dynamic 4 to 5 percent annual levels often seen last decade, when Chinese demand for commodities helped make Brazil a star among emerging markets. Poor infrastructure, high consumer debt and sagging business confidence have brought Latin America’s biggest economy back to earth since then, prompting fears of a long period of stagnant growth ahead, possibly for years to come.
But Brazil’s 2013 GDP growth was still more than twice as fast as Mexico, which has in recent years surpassed it as an investor favorite in the region.
Meanwhile, a 6.3 percent jump in investment last year should over time help ease some of the bottlenecks holding the economy back. It will also give Rousseff a major calling card with business leaders as she tries to atone for policy errors early in her left-leaning presidency and convince them her second term will be more market-friendly.
“It’s a good result, since there was more investment, and you could see a reduction in the mismatch between supply and demand. It suggests the economy is growing with a better makeup than it was before,” said Jankiel Santos, chief economist at Espirito Santo investment bank in Sao Paulo.
Santos and other economists cautioned against getting carried away by optimism, though. Retail sales and industrial data suggest 2014 will be a tougher year, with several challenges including a severe drought and problems in neighboring Argentina dragging on activity.
Indeed, the data published on Thursday contained plenty of grist for both bulls and bears.
On the positive side, household spending expanded 0.7 percent in the fourth quarter compared to the third quarter, while government spending grew 0.8 percent. For the full year, agriculture grew 7 percent compared to 2012, thanks to record sugar cane, soy and corn harvests.
However, industry shrank 0.2 percent in the fourth quarter, dragged down by a 0.9 percent fall in manufacturing. Brazil’s factories have been struggling for years with high labor costs, bad infrastructure and low productivity.
PROBLEMS WITH INFLATION
Brazil’s economy had been expected to grow just 0.3 percent in the fourth quarter, according to the median forecast of 43 analysts polled by Reuters.
The quarterly result represented a strong rebound after the economy had contracted 0.5 percent in the third quarter. Many economists believed that growth could have been negative again in the fourth quarter, which would have meant a recession.
The rise in government spending was also a mixed blessing. While it helped boost the economy, loose fiscal policy has also pushed up inflation and raised the threat of a credit downgrade by ratings agency Standard & Poor’s.
Elevated inflation has dented business and consumer confidence, prompting the central bank to raise interest rates off record lows to 10.75 percent in a non-stop cycle since April last year. It also eroded purchasing power, leading to the worst year for retail sales in a decade.
The economy grew 1.9 percent in the fourth quarter compared to a year earlier, IBGE said. That surpassed expectations by analysts polled by Reuters for growth of 1.6 percent.
(Additional reporting by Silvio Cascione and Bruno Federowski; Editing by Todd Benson and Sofina Mirza-Reid)
U.S. Federal Reserve Chairman Ben Bernanke attends the G20 finance ministers meeting during the Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013.
Credit: Reuters/Yuri Gripas
WASHINGTON |
WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke painted an upbeat picture on Saturday for the potential of innovation to lift living standards, delivering a sweeping look at the last 100 years that included memories of his 1963 South Carolina home.
Bernanke made no reference to monetary policy or the immediate outlook for the U.S. economy in prepared remarks to graduates of Bard College at Simon’s Rock, Massachusetts.
But the die-hard baseball fan did manage to work in a reference to one of the sport’s greats.
“Is it true, then, as baseball player Yogi Berra said, that the future ain’t what it used to be?,” the chairman said, noting the existence of serious skepticism that leaps in computers and other information technology would yield the same dramatic boost to growth and living standards as previous episodes of industrial revolution.
“Nobody really knows; as Berra also astutely observed, it’s tough to make predictions, especially about the future. But there are some good arguments on the other side of this debate.”
Bernanke delivers testimony on the U.S. economy on Wednesday before the congressional Joint Economic Committee.
His words will be parsed for any hint that he favors tapering Fed bond purchases, currently running at an $ 85 billion monthly pace. But recent U.S. economic data has been mixed, and economists polled by Reuters continue to expect the bond buying to continue until later this year, if not into early 2014.
Bernanke did not tip his hand during his comments to graduates, but he did offer some rare insights into his childhood home in Dillon, South Carolina to illustrate how life has not changed all that much in the last 50 years.
“We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines,” he recalled.
There was no internet, but there was a color television “although, I must acknowledge, the colors were garish and there were many fewer channels to choose from.”
After pointing out that the so-called IT revolution had not been as transformative as all that, Bernanke then went on to outline several areas where technology may only have scratched the surface in exploiting the potential for change.
He argued that IT and biotechnology have tremendous scope to improve healthcare – which absorbs a considerable amount of U.S. household income and where costs are projected to rise – as well as the potential for the development of cleaner energy.
“As trade and globalization increase the size of the potential market for new products, the possible economic rewards for being first with an innovative product or process are growing rapidly,” he said. “In short, both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”
(Reporting by Alister Bull; Editing by Tim Dobbyn)
