Opinion – Vinicius Torres Freire: First November economic news is bad

Consumer confidence has fluctuated with news of the epidemic since early 2020, as expected. Fewer deaths, the relaxation of movement restrictions and agglomeration or the recovery of some economic activity reduced the downturn, at least until July, August. Since September, Covid’s numbers have improved. Consumer sentiment deteriorated. In November it fell again, as measured by the Consumer Survey, by FGV.

Electricity consumption fell in October, compared to the same month of last year, with an economy still greatly reduced by Covid. In the first half of November, consumption dropped again, according to data from the CCEE (Electric Energy Commercialization Chamber).

Milder temperatures help explain the recent drops, but inflation hit trade again, as well as the lack of parts and supplies, a global crisis, hurting vehicle assemblers and various manufacturers, according to the CCEE analysis.

Overall, the economy’s rapid recovery from the bottom came to a halt in the second quarter. The overall performance for the third quarter is not yet out, but a central bank indicator suggests that GDP was weak. The first news in November is bad, as it turns out.

The size and persistence of inflation surprised almost everyone — economists at financial institutions were predicting a fall in the IPCA from mid-year onwards. It did not happen, in part because of the misgovernance, which inflated the price of the dollar and, in the rest, undermined confidence in general.

The Covid killing spree, which peaked in April, did enormous damage, of course. The global supply crisis has not abated.

Since September, interest rates in the financial market have soared because of inflation, but also because the owners of the money started to think that controlling government spending and, thus, debt would be a mistake. It gave.

The rapid recovery through March was partly shaken by external factors. What could be saved here, in our little domestic world, was burned by the atrocious shambles of the Plateau. The damage is done, only the size is not known, what will be left for 2022.

On the positive side, at least for short-term growth, it is possible that investments by states and municipalities “in construction” will offset part of the fall.

The inflation rate is expected to stay at a rate of 10% a year until April or so, but there is still the possibility of positive surprises, all beyond our control.

It can rain a lot, which could cause a slight relief in the price of electricity. The fate of the global energy shock is also unpredictable, depending on things like the winter in Europe and OPEC and Russia decisions on oil and gas. The global crisis in the supply of industrial inputs and congestion in freight transport could cool off earlier than expected (this year it went wrong).

As far as Brazilian economic policy is concerned, even the miracle of wisdom would be too late.

The botched change in the spending ceiling and the moratorium on court orders have already done their damage, as can be seen in the interest rate market and financial conditions in general. The hope, in this case, is just that there will be no extra worsening. There will be no major institutional changes that could change the mood a bit. On the contrary. From March or April onwards, tempers can get even more heated or depressed because of the election campaign.

The last bit of economic hope for 2022 now depends largely on luck and that no further damage occurs.