Early signs of moderation. The central bank's monthly proxy for real GDP growth (IBC-Br) increased 0.2% m/m s.a. in May (consensus: 0.4% m/m), after an increase of 0.5% m/m in April. As a reference, the average monthly pace during Q1 2011 was 0.5% m/m. The annualized 3-month moving average is now running at 4.2% m/m s.a.a.r. (seasonally adjusted annual rate). That is significantly lower than the 6.0% pace in March, and good news given the need to cool the economy below potential in order to curb underlying inflation pressures. Most estimates of “potential” growth fall in the 4.0%-5.0% range. The year-on-year comparison actually accelerated to 4.3% y/y from 2.5% y/y a month before.
As for sector performance, May weak headline figure is not so much in line with the good performance of both industrial production and retail sales in May. Industrial production increased by a strong 1.3% m/m s.a. in May, while the retail sector posted an advance of 0.6% m/m s.a. Nevertheless, it is true that recently the industrial sector has under-performed (more open to the international economy, and therefore more exposed to currency strength), while by contrast, domestic retail sales, closely linked to domestic demand, have outperformed.
In all, growth is starting to show signs of moderation. On a quarterly basis however, real GDP growth has remained essentially stable at 1.3% q/q s.a., from the same pace observed in Q1 2011. Ongoing policy tightening (rate hikes, macro-prudential measures and fiscal consolidation) should eventually cool things down.
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