Consumption grows 0.9% in the third quarter, but investment and exports pull GDP down

Motor of the Brazilian economy, household consumption grew 0.9% in the third quarter of 2021, compared to the previous three months, after falling 0.2% in the previous quarter. The data was released this Thursday (2) by the IBGE (Brazilian Institute of Geography and Statistics).

Household consumption is the main component of GDP (Gross Domestic Product) from the perspective of demand, accounting for around 60% of the calculation of the indicator.

The growth is related, according to the IBGE, to the reopening of several service activities, which benefited from a repressed demand, mainly in higher-income families, who saved a lot during the pandemic. Consumption, however, has not yet returned to pre-pandemic levels.

The institute also cites as a positive factor a migration from the consumption of goods to services, especially for those that require interaction and crowding, such as bars and restaurants and passenger transport.

“There was a certain migration of household consumption from goods to services, and services have a lot of weight in the economy and consumption. From food to accommodation, transport, business health, all the recreation, etc.”, says the Accounts coordinator IBGE Nationals, Rebeca Palis.

The IBGE claims that credit has become more expensive, but there was still growth in grants to families. He also mentioned the effect of government support programs, such as emergency aid, and the slight improvement in employment indicators, despite the drop in wages.

Although consumption growth was modest (0.9%), it is an item that has a relevant weight in GDP and contributed to the economy having a smaller drop in this quarter. The IBGE also reminds that these other services have not yet returned to the pre-pandemic level, but that the drop went from -7.8% in the second quarter to -3.8% in the third, compared to the end of 2019.

The rise in inflation, the rise in interest rates and the reduction in labor income are among the factors that reduced the purchasing power of Brazilians in the period.

Investments

The IBGE also informed this Thursday, in the release of the GDP, that productive investments in the Brazilian economy, measured by the GFCF (Gross Fixed Capital Formation) indicator, dropped 0.1% in the quarter, the second consecutive drop.

The institute also informed that there was a negative variation in stocks, due to agriculture, after the export of stored soy, mainly, something unrelated to the industry. XP and Itaú calculate that this factor took 0.5 percentage point of GDP. In other words, aggregate demand would have grown by 0.4% in the quarter.

Itaú economist Luka Barbosa says that this issue of demand is a positive factor, but highlights that there is a lot of volatility in the data and that he does not tend to give much importance to this factor. He also claims that consumption performance was not surprising.

The GDP from the perspective of demand also includes exports, imports and government consumption.

Exports dropped 9.8% between July and September, compared to the previous quarter. Imports dropped 8.3% in the quarter.

“The negative balance of goods and services ended up pulling the GDP variation down compared to the previous quarter. It is worth noting, however, that in the year-on-year comparison, both activities had a sharp increase, largely due to the resumption of international tourism, but the contribution to growth was still negative, as imports (20.6%) far surpassed exports (4.0%)”, says the coordinator of National Accounts at IBGE.

Finally, government consumption grew 0.8% in the same period.

Compared to the same period in 2020, household consumption expenditure registered a positive result for the second quarter in a row (4.2%), influenced by the increase in employment in the labor market, the expansion of credit to individuals and the advance of vaccination, according to IBGE.​

Investment grew 18.8% in the same comparison. “The magnitude of this result is justified by the increase in the production and importation of capital goods, as well as by the growth in construction”, says the IBGE.