Negative result from services generates revisions in GDP projections for 2021 and 2022

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The 1.2% drop in the services in October it fell short of expectations by the market on Tuesday (14), and has already made some investment brokers revise their projections for the Gross Domestic Product (START) Brazilian in 2021 and 2022, with a more pessimistic bias.

The result of the service sector also joins the falls in the industrial production and in the sales in commerce in October, the first month of the fourth quarter.

Rodolfo Margato, economist at XP Investimentos, stated that the data was a “negative surprise” in relation to the expectation of a 0.5% drop in XP, and also in relation to the market consensus, of a rise of 0.1%. The two consecutive negative results show “increasing risks of GDP contraction in the 4th quarter”.

The lower-than-expected performance made the GDP forecast for the 4th quarter go from a 0.3% increase to a 0.2% drop compared to the 3rd quarter. However, the projection for the 2021 GDP was maintained at 4.5%, but with a “slight downward bias”. For 2022, the expectation is of stagnation, with 0%.

THE IBC-Br, an indicator considered the preview of GDP, will be released this Wednesday (15), and XP’s expectations are now for a drop of 0.4%.

Genial Investimentos also revised its projections after the data on services, a sector that corresponds to around 70% of the Brazilian GDP. The expectation is that the IBC-Br for October will have a drop of 0.7% in the monthly comparison.

The projection for the 2021 GDP was from 4.9% to 4.8%. In 2022, an increase of 0.6% is expected.

In a report, Genial highlighted that “the result was not only negative but also presented the lowest rate of diffusion (% of activities that show growth) since April 2020. In other words, the activities of other services and communication services pushed the index, but the negative rates were generalized among activities in October”.

Ativa Investimentos stated that “the strong downward surprise in the result compared to our no longer optimistic expectations, made us revise our growth outlook from 4.5% to 4.4% in 2021”.

For analysts, the result confirms “our bad outlook on the economy this year”. The drop in services is linked, according to them, to lower income and the effects of higher interest for credit. The outlook for 2022 “is even worse”, with a GDP revision from 0.5% to 0.3%.

Necton Investimentos stated to the CNN Brasil Business which did not change the GDP projections with the result. However, she already expects a drop of 0.5% in the 4th quarter, with an increase of 4.3% in the year.

MB Associados also maintained its forecast for the 4th quarter, up 0.1%, but “with chances of revision to negative depending on the November and December data”.

Reference: CNN Brasil

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