The FINANCIAL — Brazil’s recession continued in the third quarter, killing jobs and shutting down businesses amid political turbulence that is pushing back forecasts of a recovery, according to Nasdaq.
Gross domestic product contracted 1.7% in the third quarter from the second, according to Brazilian statistics agency IBGE, the third consecutive quarter-on-quarter contraction. GDP shrank 4.5% from the third quarter of 2014. There is little relief in sight, as economists surveyed by Brazil’s central bank expect the economy to shrink by 3.19% this year and contract by 2.04% in 2016.
The statistics agency revised its figures for the second quarter, showing a contraction of 3.0% from a year earlier, from the previously reported figure of 2.6%.
The agricultural sector shrank 2.4% in the third quarter from the second, and 2.0% from the third quarter of 2014. Industry shrank 1.3% in the quarter and 6.7% from a year earlier, investment contracted 4.0% from the second quarter and 15.0% from a year earlier, and services shrank 1.0% in the quarter and 2.9% in the year.
The third-quarter GDP performance showed that the vital-services sector is shrinking more rapidly, after contracting a revised 1.8% in the second quarter from a year earlier. Brazil’s service sector, including beauty salons, banks and realtors, employs more than any other sector in the country by a wide margin, and represents about 60% of GDP.
Much of the slowdown can be pinned on a political crisis that has stalled the passage of economic reform proposals in Congress. President Dilma Rousseff has grown increasingly unpopular, with approval ratings of about 10% in recent polls, making it harder for her to convince lawmakers to support austerity measures.
The prolonged downturn, paired with 12-month inflation at 10% and unemployment at 9%, has reduced consumers’ buying power, making shoppers cut back on everything from hairdressers to restaurants to Christmas purchases as they see the economy unravel.
“Presents for kids and grandkids are out of the question” this Christmas, said Eni dos Santos Guirra, 57 years old, at her coconut stand on a shopping street in Taguatinga, a working-class suburb of Brasília.
She said that until last year she used to sell 600 chilled coconuts a week, their tops hacked off with a machete for passersby to drink the water inside them, but is now down to less than a hundred a week despite the recent sweltering heat. “Honestly, my friend, business is a catastrophe, a total disaster…If I don’t sell, I can’t buy” presents, she said.
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