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1
Economic Prospects in an Uncertain
External Environment
February 2009
Mário Mesquita
2
I. Global Economy and Asset Prices
3
Comparison among Financial Crises - Losses
Source: FMI
US
$ b
illi
on
0
400
800
1,200
1,600
2,000
2,400
savings and loans
crisis (US,
1986-95)
banking crisis
(Japan, 1990-99)
banking crisis
(Asia, 1998-99)
subprime crisis
(US, 2007-today)
Apr/08 Oct/08 Jan/09
4
Real Estate Prices – US and Japan
Sources: S&P, OFHEO and JREI
40
50
60
70
80
90
100-
6 y
ears
-5 y
ears
-4 y
ears
-3 y
ears
-2
ye
ars
-1 y
ea
r
pea
k
+ 1
year
+ 2
ye
ars
+ 3
years
+ 4
ye
ars
+ 5
ye
ars
+ 6
years
+ 7
years
+ 8
years
+ 9
ye
ars
+ 1
0 y
ears
+ 1
1 y
ears
+ 1
2 y
ears
+ 1
3 y
ears
+ 1
4 y
ears
+ 1
5 y
ea
rs
+ 1
6 y
ears
+ 1
7 y
ears
peak=
100
Case-Shiller OFHEO Japan Residential
Peaks:Case-Shiller -> Jun/06OFHEO -> Jun/07Japan -> Jun/91
57.7
95.0
79.7
5
Banking System:
Losses x Capitalization (Accumulated)
Source: Bloomberg
0100200300400500600700800900
1000110012001300
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
US
$ b
illi
on
losses capitalization
6
Accumulated Banking Sector Losses (% per
Region)
Source: Bloomberg
Americas
71%
Europe
26%
Asia
3%
7
Global Equity Markets Capitalization
Source: Bloomberg *up to Feb 9
loss from peak:
US$ 30 trillion25
30
35
40
45
50
55
60
65
Jan 07
Mar 07
Jun 07
Aug 07
Nov 07
Feb 08
Apr 08
Jul 08
Oct 08
Feb* 08
US
$ t
rill
ion
8
US and European Banking Sector:
5-year Credit Default Swaps
Source: Thomson Financial
basis
po
ints
recapitalization
programs
announced
US
Europe
Lehman Brothers
bankruptcyFannie Mae
Freddie Mac
bail out
Bear Stearns
is sold
intervention in
Northern Rock (R.U.)
Jun
07
Sep
07
Nov
07
Jan
08
Mar
08
May
08
Jul
08
Sep
08
Nov
08
Feb
09
0
100
200
300
400
500
600
9
Capital Repatriation – United States
-600
-400
-200
0
200
400
600
800
4Q
00
3Q
01
2Q
02
1Q
03
4Q
03
3Q
04
2Q
05
1Q
06
4Q
06
3Q
07
3Q
08
foreign-owned assets US private assets abroad
US
$ b
illi
on
financial assets-related flows
4-quarter moving average
Source: Bureau of Economic Analysis (BEA)
10
USA: Effort to Avoid Monetary ContractionM
1/m
on
eta
ry b
ase
% y
-o-y
monetary multiplier (lhs)
M1 (rhs)
M1 x monetary multiplier*
Source: Federal Reserve * monetary multiplier= M1/monetary base
-3
0
3
6
9
12
15
18
21
24
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Jan
07
Mar
07
May
07
Jul
07
Sep
07
Oct
07
Dec
07
Feb
08
Apr
08
Jun
08
Aug
08
Oct
08
Nov
08
Jan
09
11
Fed (lhs)
Bank of England (rhs)
Central Banks Quantitative/Credit Easing
Sources: Federal Reserve and Bank of England
75
100
125
150
175
200
225
250
275
300
800
1,100
1,400
1,700
2,000
2,300
Jan
07
Mar
07
May
07
Aug
07
Oct
07
Dec
07
Feb
08
May
08
Jul
08
Sep
08
Dec
08
£ b
illi
on
US
$ b
ilio
n
Feb
09
12
Commodity Price Indices (Total, Food and Energy)
Source: IMF
1995=
100
50
150
250
350
450
550
650
750
Jan
92
Jul
93
Jan
95
Jul
96
Jan
98
Jul
99
Jan
01
Jul
02
Jan
04
Jul
05
Jan
07
Dec
08
total
energy
food
13
GDP Growth – WEO Update (Jan/09)
Source: IMF *WEO Oct/08
%
5.2
3.02.6 2.4
2.0
3.4
0.71.0
-0.3
1.1
3.0
-0.1
0.20.5
0.10.5
-2.8
-2.0
-2.6
-1.6
-3
-2
-1
0
1
2
3
4
5
6
World UK Euro Area Japan US
2007 2008 2009* 2009
14
World Air Traffic
Source: IATA
-25
-20
-15
-10
-5
0
5
10
Jan
07
Mar
07
May
07
Jul
07
Sep
07
Nov
07
Jan
08
Mar
08
May
08
Jul
08
Sep
08
Dec
08
cargo passengers
% g
row
th (
y-o
-y)
15
World Steel: Monthly Production 2008
Source: World Steel Association
80
85
90
95
100
105
110
115
120
125
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
mil
lio
n m
etr
ic t
on
s
16
sp
read
s -
basis
po
ints
Source: Merrill Lynch *up to Feb 9
US Corporates x Emerging Markets Indices
(Spread Evolution)
50
150
250
350
450
550
650
750
Jun 07
Jul 07
Sep 07
Oct 07
Nov 07
Jan 08
Feb 08
Mar 08
May 08
Jun 08
Jul 08
Sep 08
Oct 08
Nov 08
Feb*09
Corp. AAA Corp BBB EM BBB
17
basis
po
ints
CDS (5 year): Brazil and Selected Countries
Source: Bloomberg
spread change: 6/14/07 – 2/9/2009
238 265 287 319 337 413 445 462679
2,4022,531
3,170
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Chile
Turkey
Brazil
Korea
Mexico
S. Africa
Indonésia
Hungary
Rússia
Venezuela
Argentina
Ukraine
18
basis
po
ints
Source: Bloomberg
CDS (5 year): Brazil and Selected Countries
spread change: 9/15/08-2/9/2009
98 154 182 192 203 238 260 286
508
1,7421,801
2,752
0
500
1,000
1,500
2,000
2,500
3,000
Turkey
Brazil
Chile
Korea
Mexico
S. Africa
Indonesia
Hungary
Russia
Venezuela
Argentina
Ukraine
19
% c
han
ge s
ince 6
/14/2
007
Stock Exchanges:
Brazil and Selected Countries
6/14/07 – 2/9/2009
Source: Bloomberg
IndiaChina
France
Japan
UKSpain
Germany
EUA
Hong
Kong
Brazil-55
-45
-35
-25
-15
-5
5
NIKKEI CAC 40 Shanghai S&P DAX IBEX 35 Mumbai FTSE H. Seng IBOVESPA
20
9/15/08 – 2/9/2009
% c
han
ge
sin
ce 9
/15/2
008
India China
FranceJapan
UK
Spain
GermanyUSA
Hong
Kong
Brazil
Source: Bloomberg
Stock Exchanges:
Brazil and Selected Countries
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
NIKKEI Mumbay H. Seng S&P CAC 40 DAX IBEX 35 FTSE Ibovespa Shanghai
21
Currencies: Brazil and Selected Countries%
ch
an
ge s
ince 6
/14/2
007
Source: Bloomberg
6/14/07 – 2/9/2009
13.615.3 16.2 16.3
21.8
29.7 29.833.1
37.3
48.5
53.9
0
10
20
30
40
50
60
Argentina
Chile
Brazil
Hungary
Turkey
Indonesia
Mexico
S. Africa
Russia
Korea
Ukraine
22
9/15/08 - 2/9/2009
% c
han
ge s
ince 9
/15/2
008
Currencies: Brazil and Selected Countries
Source: Bloomberg
13.1 14.418.5
23.3 24.0 24.127.4
29.331.4
40.2
62.0
0
10
20
30
40
50
60
70
Argentina
Chile
S. Africa
Brazil
Korea
Indonesia
Turkey
Hungary
Mexico
Russia
Ukraine
23
Industrial Production and CPI Inflation in
Selected Countries
US EU Japan China Russia India Turkey South
Africa
Chile Colombia Mexico Peru Brazil
Sep 08 -6.3 -2.5 0.2 11.4 6.4 5.5 -4.2 4.7 3.6 -3.5 -2.2 ... 9.7
Oct 08 -4.2 -5.6 -7.1 8.2 1.7 -0.3 -8.5 -1.8 -0.8 -7.4 -2.3 ... 1.1
Nov 08 -5.9 -8.1 -16.6 5.4 -8.7 2.4 -13.9 -4.8 -5.7 -13.3 -5.4 ... -6.2
Dec 08 -7.8 ... -20.6 5.7 -10.2 ... ... ... -3.7 ... ... ... -14.5
US EU Japan China Russia India Turkey South
Africa
Chile Colombia Mexico Peru Brazil
Sep 08 4.9 3.6 2.1 4.6 15.0 11.0 11.1 13.1 9.2 7.6 5.5 6.2 6.3
Oct 08 3.7 3.2 1.7 4.0 14.2 11.1 12.0 12.1 9.9 7.9 5.8 6.5 6.4
Nov 08 1.1 2.1 1.0 2.4 13.8 11.1 10.8 11.8 8.9 7.7 6.2 6.8 6.4
Dec 08 0.1 1.6 0.4 1.2 13.3 11.1 10.1 9.5 7.1 7.7 6.5 6.7 5.9
Dec-Sep (p.p.) -4.8 -2.0 -1.7 -3.4 -1.7 0.2 -1.0 -3.6 -2.1 0.1 1.1 0.4 -0.4
Industrial production (% YoY)
CPI Inflation (% YoY)
24
II. Brazil: Impact of the International Financial Crisis
25
FX BCB Spot Interventions (from January 2004)U
S$ b
illi
on
Source: BCB
147.3
0
20
40
60
80
100
120
140
160
Jan 04
May 04
Sep 04
Jan 05
May 05
Sep 05
Jan 06
May 06
Sep 06
Jan 07
May 07
Sep 07
Jan 08
May 08
Dec08
26
FX ReservesU
S$ b
illi
on
Source: BCB
Jan
03
Jul
03
Jan
04
Jul
04
Jan
05
Jul
05
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Dec
08
Jul
08
end-of-2004:
27.5
Apr 03:
15.9
Jan 30:
US$200.8 billion
0
30
60
90
120
150
180
210
27
External Debt / GDP%
Source: BCB
-5
0
5
10
15
20
25
30
35
40
45
90 92 94 96 98 00 02 04 06 08
total debt/GDP total net debt/GDP
28
Net External Debt vs. Sovereign Rating (S&P)U
S$ b
illi
on
Sources: BCB and Bloomberg
BBB-
BB+
BB
BB-
B+
BB-
-28.9
-40
0
40
80
120
160
200
1Q 02
3Q 02
1Q 03
3Q 03
1Q04
3Q 04
1Q 05
3Q 05
1Q 06
3Q 06
1Q 07
3Q 07
1Q 08
4Q08
29
Cumulative Reduction in FX-Linked Domestic
Debt as of Jan 2003
Source: BCB
47.7
-10
0
10
20
30
40
50
60
70
80
90
Jan
03
Jun
03
Nov
03
Apr
04
Sep
04
Feb
05
Jul
05
Dec
05
May
06
Oct
06
Mar
07
Aug
07
Jan
08
Jun
08
Dec
08
US
$ b
illi
on
30
Change in Debt/GDP Ratio to a 1% Depreciation
of the BRL
Source: BCB
basis
po
ints
-15
-10
-5
0
5
10
15
20
25
30
35
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Dec
08
-13.9
31
EXTERNAL
SHOCK
DETERIORATION
OF CONFIDENCE
FX DEPRECIATION
FX PUBLIC DEBT
DOMESTIC
EXTERNAL
PRESSURE ON
PUBLIC DEBT/GDP RATIO
External Shock Feedback Loop: Before
32
External Shock Feedback Loop: Now
EXTERNAL
SHOCK
DETERIORATION
OF CONFIDENCE
FX DEPRECIATION
REDUCTION OF
PUBLIC DEBT/GDP RATIO
FX PUBLIC DEBTPUBLIC SECTOR IS LONG IN FX
33
Net Public Sector Debt/GDP
Source: BCB *estimate, considering US$=R$ 2.31
% o
f G
DP
35
38
41
44
47
50
53
56
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Dec
08
Jan/09:
36.0%*
34
Consolidated Public Sector Primary Surplus%
of
GD
P
Dec 08
4.07%
avg. 1994-Jun/95
4.77%
avg. 1999-2002
2.91%
avg. 2003-Dec/08
4.13%
-2
-1
0
1
2
3
4
5
6
7
Jan
94
Jan
96
Jan
98
Jan
00
Jan
02
Jan
04
Jan
06
Jan
08
Source: BCB
avg. Jul/95-1998
-0.08%
35
Real Exchange Rate vs. Commodity PricesJu
n94=
100 (
RE
ER
), 2
005=
100 (
co
mm
)
Sources: BCB and IMF
REER
commodity price index ex-oil (IMF)
70
90
110
130
150
170
Jan
03
Jul
03
Jan
04
Jul
04
Jan
05
Jul
05
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Dec
08
36
REER Ju
n 9
4=
100
basket of 15 currencies
99.4
Source: BCB
60
80
100
120
140
160
180
Jan
88
Jan
90
Jan
92
Jan
94
Jan
96
Jan
98
Jan
00
Jan
02
Jan
04
Jan
06
Dec
08
37
Commodities Boom and Bust: CRB Index and
Brazilian Terms of Trade
Sources: Funcex and Bloomberg
2006 =
100
terms of trade (lhs)
CRB (rhs)
200
250
300
350
400
450
500
90
95
100
105
110
115
Jan
03
Jul
03
Jan
04
Jul
04
Jan
05
Jul
05
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Dec
08
38
Terms of Trade: The Income Effect%
-yo
y
2006 =
100
Sources: IBGE and Funcex
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
domestic demand (lhs)
terms of trade (rhs)
95.0
97.5
100.0
102.5
105.0
107.5
110.0
2
3
4
5
6
7
8
9
10
39
Commodity Prices and the Exchange Rate:
Partial OffsetsJan
2006 =
100
Source: Bloomberg * up to 2/9
60
70
80
90
100
110
120
130
140
Jan
06
Apr
06
Jun
06
Sep
06
Dec
06
Mar
07
May
07
Aug
07
Nov
07
Feb
08
May
08
Jul
08
Oct
08
Feb*
09
CRB/USD CRB/BRL
40
Wholesale Prices
Source: FGV
% %
2
4
6
8
10
12
14
16
0
10
20
30
40
Jan 07
Mar 07
May 07
Jul 07
Sep07
Nov 07
Jan 08
Mar 08
May 08
Jul 08
Sep 08
Nov 08
Jan 09
agriculture (lhs)
industrial (rhs)
12-month cumulative
41
Equity Prices and the BRL
Sources: BCB and Bovespa *Feb 6
tho
us
an
d p
oin
ts
R$/U
S$
1.50
1.75
2.00
2.25
2.50
25
35
45
55
65
75
Jun
07
Aug
07
Sep
07
Nov
07
Jan
08
Mar
08
Apr
08
Jun
08
Aug
08
Sep
08
Nov
08
Feb*
09
Bovespa Index (lhs)
exchange rate (rhs)
42
Foreign InvestmentU
S$ b
illi
on
Sources: BCB and CVM
0
30
60
90
120
150
180
210
240
270
Jan
07
Mar
07
May
07
Jul
07
Sep
07
Nov
07
Jan
08
Mar
08
May
08
Jul
08
Sep
08
Dec
08
equities
(Bovespa)
fixed
income
investment
international
reserves
43
Foreign Exchange Flows – Trade Finance (ACC)
Source: BCB
5-working day moving average
US
$ m
illi
on Lehman
Brothers
bankruptcy
credit
line
auctions
loans for
external
trade
50
100
150
200
250
300
350
400
9/5 9/19 10/3 10/17 10/31 11/14 11/28 12/12 12/26 1/9 1/30
44
Brazil: a (very) Closed Economy
(exports of goods+imports of goods)/GDP - 2007
%
Sources: IMF and WTO
0
10
20
30
40
50
60
70
80
90
100
Bra
zil
US
A
Jap
an
Ind
iaA
ustr
ali
a
Co
lom
bia
UK
Arg
en
tin
aTu
rkey
Sp
ain
Uru
gu
ay
Peru
Ru
ssia
Fra
nce
Ita
lyV
en
ezu
ela
Can
ad
aP
ort
ug
al
Bo
livia
Ecu
ad
or
Mexic
o
Ch
ina
Ch
ile
Ge
rman
yP
hil
ipp
ines
Ko
rea
Sw
itze
rlan
dP
ara
gu
ay
45
Brazil: …with Fairly Diversified Trading Relations
Exports - 2008
Source: MDIC
Latin Americaand the Caribbean
25.9%
European
Union23.4%
Asia (exc Middle East)18.9%
USA, includingPuerto Rico
14.0%
others17.8%
46
Brazil: Export/Import Composition - 2008
Exports
Source: MDIC
basic
products
37.9%
manufactured
48.1%
semi-manufactured
14.0%
raw material
and
intermediate
goods,
48.1%
capital
goods,
20.7%
fuel and
lubricants,
18.2%
non-durable
consumer
goods, 5.7%durable
consumer
goods, 7.3%
Imports
47
Brazilian Exports in 2008 – Main Destinations%
Sources: BCB and MDIC
Naft
a
Eu
rop
ean
Un
ion
Ala
di
Ea
ste
rn
Eu
rop
e
Mid
dle
East
Asia
Afr
ica
oth
er
reg
ion
s
share in the exports
growth rate in 2008
average growth rate
0
10
20
30
40
50
60
48
Reserves/Short-Term Debt%
Source: BCB
50
100
150
200
250
300
350
4Q
00
2Q
01
4Q
01
2Q
02
4Q
02
2Q
03
4Q
03
2Q
04
4Q
04
2Q
05
4Q
05
2Q
06
4Q
06
2Q
07
4Q
07
2Q
08
4Q
08
49
% o
f G
DP
Credit/GDP: Brazil vs. Mature Economies - 2007
Source: World Bank *Dec 08
0
20
40
60
80
100
120
140
160
180
200
220
Brazil*Australia
SwedenCanada
SpainUK
US
41.3
50
Brazilian Banks: Capital Adequacy Ratio
Source: BCB
% regulatory
minimum capital
ratio (11%)
6
8
10
12
14
16
18
20
2000 2001 2002 2003 2004 2005 2006 2007 Sep
2008
16.2%
Basel minimum
capital ratio
(8%)
51
III. Crisis Management
52Source: BCB
Recent Actions in the Crisis:
Liquidity in Foreign Currencyaccumulated through Feb 3
swaps
repos
trade financing
spot sales
US
$ b
illi
on
14.5
8.6
9.7
32.7
53
Domestic Liquidity: Reserve Requirements
Reduction
Source: BCB
Total
release:
R$ 99.3 bn
54
IV. Domestic Economic Conditions
55
Overnight and Term Interest Rates
Source: BCB *Feb 6
%
Selic
180-day swap
360-day swap
8
12
16
20
24
28
32
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Feb*
09
56
Real Interest Rates (360-Day Swap)
Source: BCB *Feb 6
5
10
15
20
25
30
35
40
Jan96
Jan97
Jan98
Jan99
Jan00
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Feb*09
avg. 96/99:
18.4%
6.0
avg. 00/03:
15.0%
avg. 04/05:
11.5%
avg. 06/08:
8.4%
57
Credit Growth Jan
2004=
100
Source: BCB
100
130
160
190
220
250
280
310
340
370
400
Jan
04
Jul
04
Jan
05
Jul
05
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Dec
08
households
corporates
Dec 08/Dec 07:
+24.3%
Dec 08/Dec 07:
+39.1%
58
Capacity Utilizationseaso
nall
y a
dju
ste
d, %
Sources: FGV, CNI and Fiesp
78
80
82
84
86
88
1Q 04
3Q 04
1Q 05
3Q 05
1Q 06
3Q 06
1Q 07
3Q 07
1Q 08
3Q 08
1Q 09
CNI
FGV
Fiesp
59
Employment in the Formal Sector
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan
95
Jan
96
Jan
97
Jan
98
Jan
99
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
mil
lio
n o
f jo
bs 2003: 645 thousand
avg.1995-2002: 49 thousand
avg. 2004-2008: 1,415 thousand
Dec
08
Source: MTE
60
Retail Sales
90
100
110
120
130
140
150
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Nov
08
s.a
., 2
003=
100
3-month moving average
Sources: IBGE and BCB
61
Retail Sales by Sector
Sources: IBGE and BCB
Nov 08/ Nov 07: -20.2%
90
100
110
120
130
140
150
160
170
180
190
200
Jan 01
Aug 01
Mar 02
Oct 02
May 03
Dec 03
Jul 04
Feb 05
Sep 05
Apr 06
Nov 06
Jun 07
Jan 08
Aug 08
90
110
130
150
170
190
210
230
Jan 01
Aug 01
Mar 02
Oct 02
May 03
Dec 03
Jul 04
Feb 05
Sep 05
Apr 06
Nov 06
Jun 07
Jan 08
Aug 08
98
103
108
113
118
123
128
133
138
Jan 01
Aug 01
Mar 02
Oct 02
May 03
Dec 03
Jul 04
Feb 05
Sep 05
Apr 06
Nov 06
Jun 07
Jan 08
Aug 08
94
98
102
106
110
114
118
122
126
130
134
138
Jan 01
Aug 01
Mar 02
Oct 02
May 03
Dec 03
Jul 04
Feb 05
Sep 05
Apr 06
Nov 06
Jun 07
Jan 08
Aug 08
Nov08
Nov08
Nov08
Nov08
Nov 08/ Nov 07: 6.0%
Nov 08/ Nov 07: 4.5%
Nov 08/ Nov 07: -8.7%
vehicles and motorcycles furniture and appliances
fabric, clothing and shoessupermarkets
3-m
on
th m
ovin
g a
ve
rag
e,
s.a
., 2
003=
100
62
ICC – Consumer Confidence Index
90
95
100
105
110
115
120
125
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Jul
08
Jan
09
consumer confidence indexcurrent situationexpectations index
Sep
2005=
100
Source: FGV
63
ICC – Consumer Confidence Index
Source: FGV
- 20
- 17
- 14
- 11
- 8
- 5
- 2
1
4
7
10
13
Oct
07
Jan
08
Apr
08
Jul
08
Oct
08
Jan
09
%,
m/m
-12
64
Business Expectations Index
Source: Fecap
110
115
120
125
130
135
Feb
04
Oct
04
Jun
05
Feb
06
Oct
06
Jun
07
Feb
08
Jan
09
65
Industrial Productionseaso
nally a
dju
ste
d, 2002 =
100
Source: IBGE
90
95
100
105
110
115
120
125
130
135
Jan 01
Jul 01
Jan 02
Jul 02
Jan 03
Jul 03
Jan 04
Jul 04
Jan 05
Jul 05
Jan 06
Jul 06
Jan 07
Jul 07
Jan 08
Dec08
66
Industrial Production by Sector
95
115
135
155
175
195
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
capital goods
90
100
110
120
130
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
intermediate goods
80
90
100
110
120
130
140
150
160
170
180
190
durable consumer goods
90
95
100
105
110
115
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
semi and non-durable goods
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
3-m
on
th m
ovin
g a
ve
rag
e,
s.a
., 2
002=
100 Dec 08/ Dec 07: -13.1%
Dec 08/ Dec 07: -42.2%
Dec 08/ Dec 07: -18.2%
Dec 08/ Dec 07: -1.7%
Dec
08
Dec
08
Dec
08
Dec
08
Source: IBGE
67
ICI – Business Confidence Index
Source: FGV
70
75
80
85
90
95
100
105
110
115
120
125
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Jul
08
Jan
09
Ju
l 2005=
100
68
IPCA (12m Change)
Sources: IBGE and BCB *Feb 6
IPCA (accumulated in 12 months)
market
expectations*
Jan 09
5.84%
2009:
4.73%*
0
2
4
6
8
10
12
14
16
18
Jan 03
Jul 03
Jan 04
Jul 04
Jan 05
Jul 05
Jan 06
Jul 06
Jan 07
Jul 07
Jan 08
Jul 08
Jan 09
Jul 09
Jan 10
% p
.y.
69
Core IPCA Inflation
Source: BCB
%
12-month cumulative
2
4
6
8
10
12
14
Dec
01
Jun
02
Dec
02
Jun
03
Dec
03
Jun
04
Dec
04
Jun
05
Dec
05
Jun
06
Dec
06
Jun
07
Dec
07
Jun
08
Jan
09
smoothed
non-smoothed
by exclusion
70
IPCA: Services x Non-Tradables% %
Source: IBGE
4.5
5.0
5.5
6.0
6.5
7.0
3.5
4.5
5.5
6.5
7.5
8.5
9.5
Jan
07
Apr
07
Jul
07
Oct
07
Jan
08
Apr
08
Jul
08
Oct
08
Jan
09
non-tradables (lhs)
services (rhs)
71
IPCA Inflation Expectations
12-month
ahead
%
Source: BCB
2008
2009
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Jan
07
Mar
07
May
07
Jul
07
Aug
07
Nov
07
Jan
08
Mar
08
May
08
Jul
08
Sep
08
Nov
08
Feb
09
72
Frequency Distribution of 2009 Inflation
Expectationsre
lati
ve f
req
uen
cy (
%)
Source: BCB
0
5
10
15
20
25
30
<3,8
<4,0
<4,2
<4,4
<4,6
<4,8
<5,0
<5,2
<5,4
<5,6
<5,8
<6,0
<6,2
<6,4
<6,6
<6,8
Nov 28
Dec 31
Jan 30
73
Economic Prospects in an Uncertain
External Environment
February 2009
Mário Mesquita