Brazil’s economy has entered recession after official figures showed it contracted by 1.9% between in Q2 2015 compared with the previous three months.
Analysts had expected a contraction, but the number was worse than expected.
Q1 2015 output was also revised down to show a 0.7%, rather than a 0.2%, contraction.
Brazil, the seventh-largest economy in the world, has seen economic growth fall sharply in recent times.
This is due in part to low commodity prices and sluggish global growth.
High interest rates – currently 14.25% – have also affected consumer spending, an important element of Brazil’s economy, while this year, the government has introduced stringent austerity measures designed to tackle high levels of debt.
Government spending, including on unemployment benefits, has fallen sharply, while taxes have risen.
In Q2 2015, household spending fell by 2.1% compared with the previous three months. The biggest falls came in the industrial sector, where construction output fell 8.4%
Transport, storage, postal services, financial services and insurance all saw falls in output.
Compared with a year earlier, Brazil’s economy as a whole shrank by 2.6%.
The technical definition of a recession is two consecutive quarters of economic contraction.
Eurozone has emerged from recession after a record 18 months of economic contraction.
According to the Eurostat agency, eurozone’s GDP grew by 0.3% in the second quarter of 2013, slightly ahead of forecasts.
The growth was widely expected after the German economy rose 0.7% between April and June.
However, the overall figure masks the mixed economic fortunes among the countries that make up the 17-country eurozone area.
Germany and France both posted stronger-than-expected growth, expanding 0.7% and 0.5% respectively.
Portugal, among the smallest and the weakest eurozone economies, showed the fastest growth, at 1.1%.
Eurozone has emerged from recession after a record 18 months of economic contraction
The country was one of three that had to take a multi-billion-euro bailout.
But Spain, which had to seek outside support for its struggling banking sector, saw its economic output fall by 0.1% on the quarter.
Italy and the Netherlands both saw output drop by 0.2%.
European Commission Vice-President Olli Rehn said the figures suggested the European economy was gradually gaining momentum, but added there was no room for complacency.
“There are still substantial obstacles to overcome: the growth figures remain low and the tentative signs of growth are still fragile,” he said.
“A number of member states still have unacceptably high unemployment rates; the implementation of essential, but difficult reforms across the EU is still in its early stages. So there is still a very long way to go.”
Analysts from Capital Economics said: “The return to modest rates of economic growth in the eurozone as a whole won’t address the deep-seated economic and fiscal problems of the peripheral countries.”
The figures reaffirm Germany’s position as the powerhouse behind the eurozone.
Germany narrowly avoided recession earlier this year, but GDP in the second quarter of 2013 was driven up by demand from both consumers and businesses.
The improvement comes just weeks before a federal election that will see Chancellor Angela Merkel stand for a third term in office.
The US economy unexpectedly shrank at an annualized rate of 0.1% in Q4 2012, initial official estimates indicate.
If confirmed, it would be the first contraction logged by the US economy since the 2009 global recession.
The world’s largest economy grew 3.1% in July to September.
The fourth quarter period was dominated by the “fiscal cliff” – the spending cuts and tax rises that had been due to come into force from January 1st, 2013.
These were avoided by a last-minute deal between the Republican-dominated Congress and the White House. However, economists warned at the time that fears of an abrupt cut in government spending were undermining business and consumer confidence.
However, part of that deal includes tax rises for the highest-earning Americans and – more significantly for the economy – the expiry of a payroll tax holiday for all US employees, something which is widely expected by economists to further weigh on growth during the current quarter.
The fourth-quarter shrinkage in economic output comes as a shock to analysts on Wall Street, who had been expecting 1.1% growth according to a poll by news agency Reuters. Not one economist surveyed had predicted an economic contraction.
It will add to pressure on the US Federal Reserve to do more to stimulate the economy. Members of its Federal Open Markets Committee are due to announce the conclusions of their latest policy-setting meeting later on Wednesday, and will have had an advance look at the economic data.
Growth was dragged down by a 22% cut in the federal government’s defence spending – the biggest since 1972, when the US was winding down from the end of the Vietnam War – and by the decision of many businesses to halt the rapid rebuilding of their inventories that began over the summer.
These two relatively volatile components of the data subtracted a combined 2.6 percentage points from the overall growth figure.
The US economy unexpectedly shrank at an annualized rate of 0.1 percent in Q4 2012, initial official estimates indicate
Consumer spending did pick up, as did business investment, suggesting that the economy may have some underlying momentum. Sales of computers and cars both made positive contributions to the economy’s performance.
Residential investment also grew 15%, adding to evidence that the housing market has finally turned the corner.
“Frankly, this is the best-looking contraction in US [gross domestic product] you’ll ever see,” said Paul Ashworth, an economist at Capital Economics, in a note to clients.
“The drag from defence spending and inventories is a one-off. The rest of the report is all encouraging.”
The October-to-December period was also negatively affected by Storm Sandy, which caused the closure of many factories and businesses in the New York area, and by a sharp drop in exports.
Growth for 2012 as a whole came in at 2.2%, up from 1.8% in 2011, but still unusually slow compared with previous economic recoveries in the US following recessions in the post-War era.
Looking ahead, domestic spending in the current quarter is expected to be dogged by further uncertainty over the federal government’s tax and spending.
Workers have already experienced a 2% average cut in their take-home pay, due to the expiry of the payroll tax holiday. That means a household earning $50,000 a year will have about $1,000 less to spend.
The income lost is likely to have been behind a sharp fall in consumer confidence recorded by surveys in January.
Meanwhile, the recently re-elected President Barack Obama and Congress are expected to clash once again in the coming months over the debt ceiling.
The US Treasury is approaching the $16.4 trillion legal limit on its total debt, and must gain permission from Congress to borrow the money needed for it to continue meeting its bills.
Last time there was a stand-off over the issue, in the summer of 2011, the political deadlock prompted ratings agency Standard & Poor’s to deprive the US of its top AAA rating, a move that sent stock markets sharply lower.
The US House of Representatives has passed a bill to extend the country’s debt limit until May, deferring the budget debate for a few months at least.
A new survey suggests that business activity in the eurozone contracted at its fastest pace in almost three-and-a-half years in October.
The Markit Flash Eurozone Purchasing Managers’ (PMI) Composite Output Index fell to 45.8, from 46.1 in September. A figure below 50 indicates contraction.
The reading is consistent with a quarterly rate of economic contraction in the bloc of 0.5%, Markit said.
Firms also continued to cut employment, but at a slightly slower rate.
The figures represent an initial estimate based on 85% of the normal number of monthly responses, and so are likely to be revised slightly.
Earlier, PMI figures collected by HSBC bank showed that manufacturing activity in China in October slowed at a slower pace than in previous months. The country’s PMI hit 49.1, up from 47.9 in September and the highest level in three months.
The rate of decline in the services sector eased in the eurozone, to 46.2 from 46.1 in September, but in manufacturing the rate accelerated, to 45.3 from 46.1.
Despite the easing in services, optimism in the sector deteriorated, suggesting employment would be cut further, Markit said.
Europe’s industrial powerhouse, Germany, saw output contract faster, with car exports particularly weak. France, the eurozone’s second largest economy, saw a “steep contraction” in overall business activity.
“The eurozone has slid further into decline at the start of the fourth quarter,” said Markit’s chief economist Chris Williamson.
“Official data have showed surprising resilience over the summer compared to the survey data, but the underlying business climate has clearly deteriorated markedly in recent months.
“While GDP may decline only modestly in the third quarter, a steeper fall looks to be on the cards for the fourth quarter.”
The eurozone economy contracted by 0.2% between April and June, having recorded no growth in the first quarter.
Many economists expect official figures, released in the middle of November, to show a further contraction between July and September, pushing the bloc back into recession.
“October’s decline in the eurozone composite PMI is an unpleasant surprise and reinforces concern that the economic downturn in the region may be deepening and widening,” said Martin van Vliet at ING.
Eurozone economies are struggling as governments focus on reducing debt levels following the financial crisis by cutting spending and increasing taxes, measures that are undermining growth.
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