Brazil GDP growth cools but sustained expansion seen
Brazil's vigorous economic growth eased in the third quarter, although soaring investments in new manufacturing equipment improved prospects for sustained expansion over the medium-term, official data showed on Tuesday.
Gross domestic product grew 1 percent in the third quarter from the second quarter, less than the 1.4 percent revised rate recorded in the second quarter from the first.The government's statistics agency also said GDP grew 6.1 percent in the third quarter from a year earlier, marking the fastest year-over-year growth since 1996.
Economists said the growth rate was healthy yet not so fast as to reinforce the central bank's fears that Latin America's largest economy may overheat. The data also suggested President Luiz Inacio Lula da Silva's strategy of austere spending and tight monetary policy was allowing companies to bank on the future.
"Investments have been exceeding the rate of wage growth.... This demonstrates that the investment is definitely consistent with an environment of sustainable growth," Finance Minister Antonio Palocci said at a news conference.Though investments surged, GDP results were slightly below expectations.
The average forecasts of 15 economists polled by Reuters was for 1.24 percent growth in the third quarter compared with the second quarter and 6.24 percent from a year earlier.
"The pace of the last quarter (third) was more than adequate for what the central bank considers safe to sustain growth," Adauto Lima, economist at WestLB do Brasil, said.
After 19 months of steady or falling interest rates, the central bank has hiked its benchmark interest rate three times since September to curb inflation expectations that rose on high global oil prices along with lingering worries demand could outstrip supply.
(From Reuters, November 30, 2004)
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