Q1 15 real GDP came in better than expected, helped by a meaningful inventories build up (+0.8% q/q sa). Without inventories, Q1 real GDP would have contracted -1.0% q/q sa. In addition to that, there was a positive net exports contribution: exports increased 5.7% q/q sa, larger than the imports growth of 1.2% q/q sa.
The bad news comes from domestic demand, which, without inventories, contracted 1.4% q/q sa, given the following components behavior: household consumption fell 1.5% q/q sa, and both government expenditures and fixed asset investments were 1.3% q/q sa lower. On the supply side, there was a strong drag in the services sector (-0.7% q/q sa), followed by the industrial one (-0.3%), whereas the agricultural sector experienced an expansion of 4.7% q/q sa.
"Despite the better headline reading, we believe the outlook for growth in Brazil remains quite bleak and we believe that the Copom strategy for monetary policy will hurt growth conditions even further. We forecast that Q2 15 real GDP contracts by 0.7% q/q sa, with risks to the downside given the high-frequency indicators we have thus far." said Barclays Capital
