Economic growth accelerates sharply in Q2

Growth hits a two-year high: GDP growth picked up to 3.8% year on year in the second quarter of 2024 from 0.6% in Q1, marking a two-year high. On a seasonally adjusted quarter-on-quarter basis, economic growth gained traction to 2.0% in Q2 from the previous period's 0.9% increase, marking the best result since Q1 2023.

Exports surge, but household spending slows: Looking at the details of the release, public consumption rebounded, growing 4.4% in Q2 (Q1: -1.7% yoy). Fixed investment also bounced back, growing 0.1% in Q2, contrasting the 5.9% contraction logged in the prior quarter. Less positively, household spending growth fell to 0.9% in Q2 (Q1: +1.7% yoy), marking the weakest expansion since Q1 2021. On the external front, exports of goods and services growth accelerated to 14.4% in the second quarter (Q1: +5.1% yoy), which marked the best reading since Q1 2022 and partially reflected a favorable base effect. Conversely, imports of goods and services contracted at a quicker rate of 4.3% in Q2 (Q1: -3.7% yoy).

Stronger growth in store for the coming quarters: Looking ahead, our panelists anticipate stronger growth in H2 compared to H1. As a result, 2024’s full-year growth is forecast above 2023’s rate; the agricultural sector, now recovering from last year’s drought, is set to boost exports and support the public coffers, while rebounding fixed investment will also support growth. That said, our panel has penciled a slowdown for 2025 from 2024’s expected growth rate on the back of cooling exports. A stronger-than-expected La Niña weather phenomenon is a downside risk.

Panelist insight: Commenting on the release, analysts at Itaú Unibanco stated: “Despite the higher-than-expected growth in 2Q24, we have lowered our 2024 GDP growth forecast to 3.0% from 3.5%, reflecting the weaker start to 3Q24. Our 2025 GDP growth forecast has also been lowered, to 2.5% from 3.0%, to reflect a lower statistical carryover.”

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