Brazil economy 'shrinks 1.2 percent' in second quarter

By Ben Tavener
SAO PAULO (AA) – Brazil's economy contracted by 1.2 percent in the second quarter of this year, according to preliminary industry and retail figures from the country's central bank. The shrink is being partially blamed on Brazil’s hosting of the World Cup by economists. Friday’s seasonally-adjusted data shows economic activity was down for a second consecutive month in June, dropping 1.48 percent after shrinking 0.8 percent in May. The figures suggest the worst monthly result since May last year when activity in Latin America's biggest economy slumped 1.68 percent.
Major cities, including Sao Paulo and Rio de Janeiro, were affected by public sector strikes and a number of extra public holidays were decreed to help ease congestion on public transport.
Brazil's national statistics agency said industrial production was down for the fourth consecutive month, by 1.4 percent in June, and retail sales were the worst in two years, dropping by 0.7 percent.
The central bank figures also suggested the economy shrunk by 1.2 percent between April and June in comparison to the first quarter of 2014. If confirmed, it would represent the worst quarterly fall since 2009, when it shrank 2.67 percent, the G1 news site reported.
Official figures showed the economy grew 0.2 percent in the first quarter of 2014. Second-quarter results will be released on August 29.
The latest survey of market analysts suggested Brazil's economy will expand in 2014, but only by just over 0.8 percent, and by 1.2 percent in 2015.
However, the outlook for annual inflation in 2014 was recently reduced to 6.26 percent, within the central bank's target range.
The state of the economy will play a central role in Brazil's general election on October 5, in which President Dilma Rousseff is vying for re-election.
Rousseff has been criticized over her tight grip on the country's fiscal policy, and her main rival in the presidential race, Aecio Neves will attempt to seize on the economic results of her first term, which has been characterized by sluggish growth.