Brazilian economic activity fell in September this year, according to information released this Monday (17) by the Central Bank (BC). The Central Bank’s Economic Activity Index (IBC-Br) decreased 0.2% compared to the previous month, considering seasonally adjusted data (adjusted for the period). In the third quarter, from July to September, the reduction reached 0.9%.
In comparison with September 2024, there was a positive variation of 4.9%, without adjustment for the period, since the comparison is between equal months. In the year to date, the indicator was positive at 14.2% and, in 12 months, it registered an increase of 13.5%.
The IBC-Br is a way of evaluating the evolution of the country’s economic activity and helps the BC’s Monetary Policy Committee (Copom) to make decisions on the basic interest rate, Selic, currently set at 15% per year. The index incorporates information on the level of activity in sectors of the economy – industry, commerce and services and agriculture –, in addition to the volume of taxes.
Selic is the BC’s main instrument for achieving the inflation target. When Copom increases the Selic, the purpose is to contain heated demand; and this has an impact on prices because higher interest rates make credit more expensive and encourage savings. Therefore, higher rates help to reduce inflation, but they can also hinder the expansion of the economy.
When the Copom reduces the Selic, the tendency is for credit to become cheaper, encouraging production and consumption, reducing control over inflation and stimulating economic activity.
The reduction in the electricity bill pushed official inflation down and made the Broad National Consumer Price Index (IPCA) – considered official inflation – close October at 0.09%the lowest for the month since 1998, according to the Brazilian Institute of Geography and Statistics (IBGE). With this result, inflation accumulated in 12 months is 4.68%, the first time in eight months that the level is below 5%. However, still above the inflation target ceiling of 4.5%.
The decline in inflation and the slowdown in the economy led to the maintenance of the Selic rate for the third time in a row, at the last meeting, at the beginning of this month. However, the board does not rule out the possibility of raising interest rates again “if it deems it appropriate”. The rate is at its highest level since July 2006, when it was 15.25% per year.
In a note, the BC reported that the external environment remains uncertain due to the situation and economic policy in the United States, with repercussions on global financial conditions. In Brazil, the authority highlighted that inflation remains above the target, despite the slowdown in economic activity, which indicates that interest rates will remain high for a long time.
Gross Domestic Product
Released monthly, the IBC-Br employs a different methodology from that used to measure the Gross Domestic Product (GDP), which is the official indicator of the Brazilian economy published by IBGE. According to the BC, the index “contributes to the development of the country’s monetary policy strategy”, but “is not exactly a preview of GDP.”
GDP is the sum of all final goods and services produced by a country. Driven by the expansion of services and industry, in the second quarter of this year, the Brazilian economy grew 0.4%.
In 2024, GDP closed with an increase of 3.4%. The result represents the fourth consecutive year of growth, being the biggest expansion since 2021, when GDP reached 4.8%.
