By Marcela Ayres
BRASILIA (Reuters) -Brazil’s economy lost momentum in the second quarter but still outperformed market expectations, driven by resilient services activity and gains in the extractive industry, official data showed on Tuesday.
Gross domestic product in Latin America’s largest economy grew 0.4% in the April-to-June period from the previous quarter, statistics agency IBGE said, above the 0.3% expansion expected by economists in a Reuters poll.
That marked a steep slowdown from revised 1.3% growth in the first quarter, when seasonal farm output boosted performance in the agricultural powerhouse. Farming output slipped 0.1% in the second quarter from the prior three months.
Industrial production rose 0.5%, helped by a 5.4% increase in extractive industries. Services, which account for about 70% of Brazil’s GDP, expanded 0.6%, underpinned by a robust labor market.
On the demand side, investments as measured by gross fixed capital formation fell 2.2% after driving growth in the first quarter, pressured by high borrowing costs.
The central bank has raised interest rates by 450 basis points since September last year to 15%, a near two-decade high, and kept them steady in July.
Government consumption declined 0.6%. But household consumption grew 0.5%, supported by measures from President Luiz Inacio Lula da Silva’s government to sustain wage gains.
Year-on-year, GDP expanded 2.2%, in line with expectations in the Reuters poll. The government projected in July a 2.5% expansion in 2025, following 3.4% growth last year.
(Reporting by Marcela Ayres; Editing by Andrew Heavens and Bernadette Baum)
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