São Paulo – The Composite Leading Economic Index (LEI) for Brazil decreased 1.6% in January, now standing at 93.6 points. The index for December, which was considered stable, was reviewed and now shows a 0.2% drop. As the index also dropped in November (1.4%), it now registers three consecutive declines. The index is surveyed by The Brazilian Institute of Economics of Fundação Getulio Vargas (Ibre/FGV) together with The Conference Board (TCB), an American nonprofit association.
“The expectation is for the economy to remain weak, with additional factors that increase the risk of it entering a recession period”, stressed Ibre’s superintendent of economic cycles, Aloísio Campelo. According to the economist, the indexes have shown that the economy is stagnant, with factors that can worsen expectations. “A fiscal tightening ahead. The monetary policy also being tightened. There are risks involved with the potential rationings of water or power, or maybe both”, listed Campelo.
The most recent LEI shows that economy expectations worsened again after a brief optimistic period. In January, only three of eight LEI’s components had a positive result, among them, the Physical Production of Durables Consumer Goods Index.
According to Campelo, this particular index had a positive result due to the auto inventory clearance under the exemption for Tax on Industrialized Products (IPI, on the Portuguese acronym). “It improved favorably in January because in December and January there was that auto clearance with the reduced IPI”, highlighted the economist, who believes that the indicator will not keep improving in the next months.
Other factors that influenced the index, which already are on a downward trend, should remain so, in the opinion of the economist. Among them is the value rate between products imported and exported by Brazil. “As Brazil is a commodities exporter, and commodities are dropping in the global market, both agricultural and metal, the price of our exports are getting lower than the prices of imports.”
*Translated by Sérgio Kakitani
