Brazil's economic activity deepens slowdown in July, falling 0.2%

Brazil's economy contracted 0.2% in July from June, according to the central bank, as reported by the portal Banca y Negocios. The decline confirms a cooling trend in the region's main engine, after it had already fallen 0.6% the previous month.

The index, considered a preliminary measure of gross domestic product (GDP), shows a more moderate picture after growth of 2.3% recorded last year, in contrast with the more conservative projections of the International Monetary Fund (IMF) for the close of this period.

On a year-on-year basis, economic activity posted a gain of 1.1% in July. However, monthly performance was weighed down by declines in key sectors such as agriculture (which fell 1.2%) and industry (which dropped 0.4%), while the services sector remained stable.

Among the factors pressing on activity, the high interest rate stands out, at 14% a year, a monetary tool that makes credit more expensive and curbs both domestic consumption and productive investment.