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Brazilian 'mini-bubble' deflated to stability
28/07/2010
The deflation of a short-lived 'mini-bubble' in Brazil's economy is creating a more stable economy, according to economists.
After the annual growth rate jumped to nine per cent in the first quarter of this year, the four per cent recorded for the second quarter has been welcomed by experts, who say it is a far more sustainable level.
They said it was an inevitable slow-down, given Brazil's chronic bottlenecks in infrastructure, but that it has also been sparked by a more prudent mentality among consumers.
Local economists still expect Brazil's economy to expand by 7.2 per cent this year, according to the latest weekly central bank survey, issued on Monday. It means it will remain as one of the world's only economic bright spots.
The bubble began as consumers rushed to take advantage of temporary tax breaks on durable goods and other products before they expired.
The sudden reversal of that trend is now reverberating throughout the economy as inventories rise and manufacturers adjust production accordingly, said Tony Volpon, head of Americas emerging market research at Nomura Securities.
"Everybody just went on a bender during the first quarter and bought all the TVs and cars they wanted, and now they've just stopped," Volpon said.
After the annual growth rate jumped to nine per cent in the first quarter of this year, the four per cent recorded for the second quarter has been welcomed by experts, who say it is a far more sustainable level.
They said it was an inevitable slow-down, given Brazil's chronic bottlenecks in infrastructure, but that it has also been sparked by a more prudent mentality among consumers.
Local economists still expect Brazil's economy to expand by 7.2 per cent this year, according to the latest weekly central bank survey, issued on Monday. It means it will remain as one of the world's only economic bright spots.
The bubble began as consumers rushed to take advantage of temporary tax breaks on durable goods and other products before they expired.
The sudden reversal of that trend is now reverberating throughout the economy as inventories rise and manufacturers adjust production accordingly, said Tony Volpon, head of Americas emerging market research at Nomura Securities.
"Everybody just went on a bender during the first quarter and bought all the TVs and cars they wanted, and now they've just stopped," Volpon said.
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