Brazil's economy outperforms in Q2 as industry, services defy flood impact

Brazil's economy surprised to the upside in the second quarter as the strength of its services and industry sectors offset the impacts of deadly floods in a southern state, bolstering expectations for a solid full-year performance.

The country's gross domestic product (GDP) expanded 1.4 per cent in the three months through June 30 on a sequential basis, accelerating from the revised 1.0 per cent growth recorded in the first quarter, statistics agency IBGE said on Tuesday.

The quarter-on-quarter performance was above the 0.9 per cent increase expected in a Reuters poll of economists. Year-on-year growth reached 3.3 per cent, surpassing the 2.7 per cent increase projected in the poll.

On the supply side, the main contribution came from the industrial sector, which expanded 1.8 per cent from the previous quarter.

The services sector, the driving force behind Latin America's largest economy, also made its contribution with a 1.0 per cent increase from the first quarter. The farm sector, on the other hand, decreased 2.3 per cent.

On the demand side, fixed business investment increased by 2.1 per cent, while household consumption - buoyed by a strong labor market - rose 1.3 per cent, the same growth rate recorded by government spending.

Finance Minister Fernando Haddad has been saying the government is likely to revise its full-year economic growth forecast upwards from the current 2.5 per cent, which it had kept unchanged in July.

In May, unprecedented floods that devastated Rio Grande do Sul state, killing more than 180 people and displacing hundreds of thousands, prompted a series of federal government aid measures totaling more than 27 billion reais ($4.8 billion).

Many economists believe this assistance mitigated the expected losses from the disaster.