A quick bit about Brazil and the demand for growth appeared in this morning’s Global Strategy newsletter from RBS. Here’s the breakdown of how they see Brazil as one of the fastest growing BRICs:
RBS: Demand is driving growth in Brazil. For example, October retail sales jumped 1.4%, which was double market expectations, and the general trend in consumption is accelerating.
This confirms the view that the BCB will start hiking in Q2 rather than Q3 despite the fact that the output gap will remain negative. With Finance Minister Mantega keeping the accelerator on the fiscal stimulus and limiting the appreciation of the BRL, the only way for the Brazilian economy to cool off is via the monetary channel.