Real GDP growth accelerated to +0.8% q/q in Q3, up from +0.2% in Q2. This was the fastest q/q pace since Q1 2017, the first recovery quarter after Brazil’s worst recession. Compared to Q3 2017, GDP grew +1.3%. This confirms Q2’s weak performance was a temporary dip due to the truckers’ strike in May. Private consumption added +0.4pp to Q3 q/q growth as unemployment continued to decrease from 12.4% in June to 11.9% in September. Investment surprised on the upside (+1% q/q, up from +0.2% in Q2). Annual GDP growth could reach +1.3% in 2018 and accelerate to +2.3% next year, thanks to the gradual recovery of consumption as the job market improves and higher investment as electoral uncertainty partly dissipates. Yet, reforming pensions will prove difficult and we cannot exclude volatility in President Bolsonaro’s policy choices due to his history of backing statist policies and the necessity to compromise to build a parliamentary coalition. Subdued growth remains our medium-term baseline, especially as monetary policy is expected to be tightened in 2019.
