Brazilian economy contracts more than expected in Q3

Brazil's economy contracted more than expected in 3Q13 as growth decreased 0.5% quarter-on-quarter in seasonally adjusted terms, figures released by the country's national statistics agency IBGE show.

The market consensus had expected a contraction of 0.30%, and the third quarter performance was a far cry from the 1.8% expansion that the economy had recorded in the second quarter.

The quarterly contraction was due to a 3.5% drop in the agriculture sector and weak performance by the services and industrial sectors, which both grew by 0.1%.

YEAR-ON-YEAR PERFORMANCE

Latin America's largest economy expanded 2.2% in 3Q13 compared to the same quarter last year, and lost steam compared to 2Q13 when the expansion was 3.3%.

Growth was led by the services sector with a 2.2% increase, followed by the industrial sector which grew 1.9%. The agriculture sector for its part recorded a drop of 1%.

Goldman Sachs (NYSE: GS) said that the Brazilian economy is well on track to record three consecutive years of subpar under-3.0% growth which reaffirms the view that the key impediments to growth in Brazil are structural and domestic rather than cyclical or external.

The heterodox interventionist haphazard cyclical management of the economy in recent years and tolerance of key imbalances in the economy have deteriorated confidence, and added visible head winds to growth which are likely to remain in place throughout 2014, said the US investment bank.

2012 GROWTH REVISION

IBGE​ said that it had revised the Brazilian economy's full year growth rate in 2012 to 1% from the previously reported 0.9%.