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Indicators of Confidence in the Economy Show Generalized Decline

07/10/2018 - 10h50



Skepticism regarding renewed growth in the Brazilian economy is generalized. In June, six confidence indicators tracked by FGV (Getulio Vargas Foundation) fell, adding to the damaged caused by the truckers' strike. Although the main concern is that the decrease in confidence preceded the strike.

The indices had begun to show improvement which seemed consistent with the overall scenario at the end of 2017 and the beginning of 2018 but started falling again during March and April.

The FGV confidence indicators attempt to measure the mood of the industrial, commerce, services and civil construction sectors as well as that of consumers and business owners and managers.

The scales ranges from zero (total lack of confidence) to 200 (maximum confidence). Historically, they have oscillated between 60 and 140.

Currently, the indices are below 100, indicating generalized pessimism. The exception is the industrial index, which has also fallen, but is at 100.

None were more marked in their decline than the consumer confidence index. It fell by nearly five points in June - the largest decrease since February of 2015.

The index for civil construction is also a cause of concern because, in addition to not showing any improvement, it is below what is considered to be neutral, due to the lack of governmental resources for public works projects, difficulties that companies involved in the Car Wash investigation are going through and a weakly performing residential construction market.

The Central Bank revised downward its current forecast for economic growth for the year to 2.6% from its previous forecast of 1.6%.

After reducing their projections for GDP growth from 3% to 1.5%, leading economists are waiting for the next round of FGV's confidence indices measurements to decide upon their next steps.

Translated by LLOYD HARDER

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