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After Methodological Adjustments, Central Bank Index Signals Strong First Trimester GDP Growth for Brazil

Colton Wade
After Methodological Adjustments, Central Bank Index Signals Strong First Trimester GDP Growth for Brazil

Brazil’s Central Bank Economic Activity Index rose higher than expected in February, indicating that the country’s GDP growth may exceed expectations for the first trimester of 2017. Some economists argue that the index’s increase shows that Brazil may rise out of its recession faster than previously expected, possibly within the year’s first trimester. Others emphasize that while Brazil is recovering, it will not see meteoric growth, but rather gradual, sustained expansion fueled by a strong agricultural harvest in 2017. However, the increase may be due at least in part to methodological changes to the Brazilian Institute for Geography and Statistics’ (IBGE) Monthly Study of Trade and Monthly Study of Services, which in January expanded the number of companies sampled and changed their base year to 2014. A number of economists are arguing that the statistical uptick is nothing more than a product of these methodological adjustments and does not reflect a real acceleration in GDP growth, which has stopped falling but has failed to rise significantly due to unemployment, credit restrictions, and high indebtedness. 

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Colton Wade

Colton Wade

Staff Intern (Spring & Summer '17)
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