April 16, 2018 / 12:45 PM / 7 days ago

Brazil Feb economy activity underwhelms as recovery stumbles

BRASILIA, April 16 (Reuters) - Economic activity in Brazil barely expanded in February after contracting the month before, central bank data showed on Monday, suggesting the recovery hit a bump in the first months of the year.

The central bank’s economic activity index rose 0.09 percent from the month before, less than the 0.15 percent median estimate in a Reuters survey of economists.

The bank also revised the January reading to show a larger contraction of 0.65 percent, compared to the previously published 0.56 percent decline, adding to a string of weak readings on retail sales and services activity suggesting sluggish first-quarter economic growth.

This highlights an uneven pickup from the deepest recession in decades, which slashed Brazil’s gross domestic product by 8 percent between the fourth quarter of 2014 and end-2016.

It also suggests the central bank will find no resistance to cutting interest rates once again to a new record low next month, with inflation stagnated below the bottom end of its target range amid double-digit unemployment rates.

In a report, JPMorgan economists said the latest batch of disappointing activity figures may prompt them to revise down their forecast for a 3.2 percent pace of economic growth in the first quarter.

Yields paid on interest rate future contracts were slightly lower in early trading as investors increased their bets on a 25 basis-point rate cut at the central bank’s May meeting.

Central bank chief Ilan Goldfajn has repeatedly stated plans to cut the benchmark Selic rate next month and then stand pat. (Reporting by Bruno Federowski Editing by Frances Kerry)

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