BofA makes fourth negative review for Brazil’s economy

A Bank of America indicator for Brazilian economic activity dropped again in December, registering a negative sign for the fourth consecutive month, as inflationary, political and fiscal risks, as well as production bottlenecks, continue to threaten the country’s outlook.

The index recorded its eighth consecutive drop last month, to -0.51 point, BofA reported this Monday, its lowest level since June 2020. In November, the indicator had a revised reading of -0.26 point. .

All components of the general index of BofA contributed to the worsening of the indicator in the last month of 2021. The most negative contribution came from car sales, with a record of -0.23 point in December, although this represents an improvement compared to the reading of -0.34 point from the previous month.

“The decline in our coincident indicator points to a weak last quarter of 2021”, said in a report David Beker, head of economics in Brazil and strategy for Latin America at BofA, explaining that he considers his index to be a good predictor of the movements of the IBC- br This, in turn, is an indicator released by the Central Bank that helps to delineate the direction of GDP (Gross Domestic Product).

Although the US bank still expects a 4.90% expansion in Brazilian economic activity in 2021 – a projection above the median of 4.50% in the most recent Focus survey, by the Central Bank –, “persistent weakness in economic data represents a downside risk to our forecast due to high inflation, higher interest rates, increasing political and fiscal noise, and input shortages,” Beker said.

According to BofA, a risk that leans to the upside is a greater-than-expected recovery in services, although another wave of Covid-19 could threaten the sector by leading to stricter restrictions to combat the disease.

The Central Bank will release the November reading of the IBC-Br on January 17th.