MercoPress. South Atlantic News Agency

Brazilian economy contracts 0.5% in third quarter, but still 2.2% annually

The downturn was driven mainly by a 3.5% contraction in the agriculture sector

The Brazilian economy slipped into contraction in the third quarter after recording strong growth in the June quarter. Data released by statistical office IBGE on Tuesday revealed that GDP decreased a seasonally adjusted 0.5% sequentially in the September quarter, more than offsetting the upwardly revised 1.8% growth recorded in the second quarter.

 The downturn was driven mainly by a 3.5% contraction in the agriculture sector. Manufacturing and service production remained broadly unchanged.

The expenditure side break-up of the GDP showed that gross fixed capital formation decreased 2.2% quarter-on-quarter in the three months to September. Meanwhile, domestic consumption expenditure increased 1%, and government's consumption expenditure by 1.2%.

Annually, GDP increased 2.2% in the third quarter, slower than second quarter's 3.3% growth. Expectations were for a 2.4% growth.

However Brazil's economic performance is not encouraging: last year it posted only 0.9% growth after 2.7% in 2011 and 7.5% in 2010.

Last week, Brazil's central bank raised its benchmark interest rate to 10% from 9.5%, the sixth time in a row that it had put up borrowing costs.

The latest rise, which took the key rate to the highest level since March 2012, came as part of efforts to curb persistently high inflation. Consumer prices in the country rose by 5.8% in October from a year earlier, above policymakers' 4.5% target.