Analysis: GDP was bad, but for reasons not as bad as expected

The performance of the economy, of the GDP (Gross Domestic Product), in the third quarter was bad, as almost everyone already knew or felt in the flesh. But looking at the numbers from the inside, it wasn’t the worst. The problem is that, even so, in the optimistic hypothesis, we are going to stagnate or almost that in the next year, 2022.

The GDP of 2021, the average level of production or also income, will remain practically the same in relation to 2019, the year before the epidemic — we are just going to recover the fall of 2020. A problem that should also be obvious is that, well, GDP (income) per capita is at the same level recorded in far-off 2009. There are 12 lost years.

As the recovery of activity in the final quarter of this year is expected to be weak, the basic outlook for 2022 is one of stagnation, with a risk of recession for the whole year, “closed”.

Third-quarter GDP fell a sharp 0.1%. It wouldn’t be all that bad news if the pace of second quarter GDP hadn’t been revised downwards (the drop was greater than announced three months ago).

There was a greater-than-expected drop in agriculture, 8% from the previous quarter — the drought caused a great deal of damage, an uncontrollable cyclical effect. Inflation hurt trade, bidu, as well as depressed consumer confidence (which continued to depress in the last quarter). But private consumption in general grew.

The industry fell for the third straight quarter, hitting on several sides: inflation, expensive inputs and energy, and lack of parts and materials to produce. But it didn’t fall as much as predicted. Civil construction continued well. The recovery of the services sector, especially education and health, was reasonable.

What took the most points out of growth in the quarter? Industries have depleted inventories (instead of “producing” them). The external sector took a tumble (exports, sales abroad, fell even more than imports, in absolute numbers). Investment (in new production facilities, machinery, equipment, homes, etc.) dropped a little. Given the mix of risks and thick fog of uncertainty, it’s going to be hard to bounce back until 2023 (yes, after the election).

Weather problems and some other downturn in the meat market brought agriculture down—the skies didn’t help (just as the drought caused more problems in energy production). The external crisis harmed the industry and had a great contribution to the increase in inflation, a famine that was worsened by the general lack of governance and the political and economic turmoil caused by Jair Bolsonaro and his gang.

Although it doesn’t look good at all, 2022 is still an open question. Or at least the size of the bullshit is anyone’s guess.

More likely, we will have higher interest rates and financial turmoil due to the electoral campaign. That is to say, everything else is constant, retraction in investments (in expansion of production capacity, civil construction, etc.). We don’t know how far inflation will go (and therefore we don’t quite know how far interest rates will go). For now, the forecast is not good, but positive surprises cannot be ruled out (more rain for hydroelectric plants, less global industrial supply crisis, cooling of the global energy crisis, good weather for agriculture, large volume of investments “in works” of states and municipalities).

For now, it is worth repeating, the most reasonable expectation is economic stagnation.