Brazil growth slows as trucker strike darkens outlook

Quickview: Striking truck drivers are likely to further hamper a Brazilian economy already experiencing a slowdown in activity.


Craig Botham

Craig Botham

Senior Emerging Markets Economist

Brazilian growth decelerated in the first quarter of 2018, reflecting the slowdown seen in global activity. This is highlighted by the slowdown witnessed in exports, which outstripped that of any other component of growth.

At 1.2% annual growth, activity was much slower than the 2.1% growth recorded in the final quarter of 2017, driven by much weaker export growth of 6% from 9.1% previously, and a further contraction in government spending. Investment was actually reasonably stable on an annual basis, while consumption accelerated.

Given our expectation that the second quarter should see something of a rebound in global activity, it would be odd if Brazil did not enjoy something similar. Momentum in investment and consumption seems healthy, so if the external environment once again turns more supportive of trade, Brazilian growth should recover somewhat.

However, weighing against this is the impact of the current truck driver strike in Brazil. Though only running for ten days so far, the strike will already have had negative effects on activity, disrupting the supply of goods and so likely impacting consumption. We would also expect investment sentiment to suffer in this environment.  The strike also concerns us because the government’s response, in making concessions, damages the fiscal outlook and likely encourages additional strike action.

At present, we see downside risks to our growth forecast for this year, and are also turning more negative on the longer term political and economic outlook.