Lower interest rates and maintenance of economic stability
In the first half of 2012 the macroeconomic policy combined lower interest rates with economic stability and employment growth
In July, the Selic rate (basic interest rate) reached its lowest historical level, with the target set at 8.0% per year by the Monetary Policy Committee (Comitê de Política Monetária - COPOM). Lower interest rates relieve the burden on productive investment, favor the tax result and reduce the pressure of capital turnover on the exchange rate.
The inflation rate continues to drop. In the first half of 2012, the accumulated variation of the IPCA (Broad Consumer Price Index) was 2.32%, the lowest for the period since 2007.
The accumulated index in the period June/2012 – July /2011 recorded a variation of 4.92%, the ninth consecutive fall of the accumulated index in 12 months. According to the behavior of the IPCA, cumulative inflation should be close to the center of the target range of 4.5% by the end of the year.
The primary surplus of the consolidated public sector (Central Government, Regional Governments and State-Owned Companies) reached R$ 62.87 billion year-to-date from January to May, accounting for 3.55% of GDP. This result is equivalent to 45% of the 2012 target (R$ 139.8 billion). In the first five months of 2012, the Central Government surplus - which includes, besides the Federal Government, the Central Bank and the Social Security Institute - amounted to R$ 46.04 billion (2.60% of GDP), virtually matching the target for the first eight months of the year (R$ 46 billion).
The surplus achieved in the period from January to May corresponds to 47.5% of the target set for the year, of R$ 96.97 billion.
The successive primary surpluses has enabled a steady reduction in public debt. In May 2012, the net public sector debt accounted for 35% of GDP.
Foreign Trade and Investment
In the first half of 2012, the trade flow achieved US$ 227.4 billion, a level higher than that of the same period in 2011. Exports totaled US$ 117.2 billion, a decrease of 1.7% by the daily average over the first half of 2011, while imports amounted to US$ 110.1 billion, up 3.7% on the same basis of comparison. As a result, the trade balance fell from US$ 13.0 billion to US$ 7.1 billion when comparing the two periods.
The capital and financial account recorded a surplus of US$ 40.4 billion from January to May 2012, compared to US$ 62.6 billion over the same period in 2011. Foreign direct investment fell from US$ 27.0 billion to US$ 23.3 billion. Brazilian direct investments abroad increased from US$ 2.6 billion to US$ 6.1 billion.
Economic Activity and employment
In the first quarter of 2012, the Gross Domestic Product at market prices grew 0.2% in the seasonally adjusted series. GDP grew 1.9% in four consecutive quarters, with an increase of 0.7% in Industry, 2.1% in Services and 0.8% in Agriculture and Livestock.
The economic sectors showed different performances in the first months of 2012. Until May, retail trade had risen 9.0% in sales volume and 11.9% in nominal revenue, with seasonal adjustment.
The volume of industrial production, in turn, decreased 3.4% year-to-date by May 2012. In a 12-month period the decline is smaller: -1.8%. However, industry maintains a high production level, and the effects of the current phase of the international crisis are less severe than those recorded in the 2008 crisis.
The labor market continues to grow. A total of 877,909 formal jobs were created in the first five months of 2012 - an increase of 2.32% compared to December 2011.
The unemployment rate measured by the IBGE (Brazilian Institute for Geography and Statistics) in the six largest metropolitan regions maintained the downward trend, having reached 5.8% in May, the lowest rate for that month since 2002, when the current research series started.
The formalization of the labor market continues to rise, with a 3.9% increase in formal employment and a 6.9% decrease in informal employment in the last 12 months.