By Jeffrey T. Lewis
SÃO PAULO--Brazil's economy shrank in the third quarter from the previous three months as a drought hit agricultural production, outweighing growth in the service sector.
Gross domestic product contracted by 0.1% in the three months through September compared with the second quarter of 2021, and expanded 3.9% from the third quarter of 2020, the Brazilian Institute of Geography and Statistics, or IBGE, said Thursday.
In the second quarter, GDP shrank by a revised 0.4% from the first quarter and expanded by a revised 1.9% from a year earlier, the IBGE said.
After three consecutive quarters of expansion starting in the third quarter of last year, Brazil's economy is now struggling to grow amid rapidly rising prices and the logistics problems that for months have plagued countries around the world. To make things worse, Brazil is the world's biggest producer and exporter of soybeans, coffee and sugar, and the drought over the past year also slammed the country's corn, sugarcane and coffee crops.
Agricultural production plunged 8.0% in the third quarter from the second and increased 0.2% from a year earlier, the IBGE said Thursday.
The advance of Brazil's vaccination programs against the coronavirus has allowed businesses to reopen, and even with rapid inflation eating away at some of the potential gains from the increased activity, household spending rose 0.9% on the quarter and was up 2.1% from a year earlier, the IBGE said. Services expanded 1.1% on the quarter and grew 3.3% from a year earlier, it said.
In response to rising prices, the country's central bank has been raising its benchmark lending rate to slow inflation, making borrowing more expensive for businesses. Gross fixed capital formation, a measure of investment, declined 0.1% in the third quarter and soared 20.2% from a year earlier.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com
(END) Dow Jones Newswires
12-02-21 0746ET
