Brasilia (Udaipur Kiran) – Brazil’s economy experienced a marked slowdown in the second quarter of the year but still exceeded market forecasts, according to official data released on Tuesday. The performance was supported by strong services activity and growth in the extractive industry.

Gross domestic product (GDP) for Latin America’s largest economy grew by 0.4% in the April-to-June period compared to the previous quarter, as reported by statistics agency IBGE. This growth outpaced the 0.3% expansion anticipated by economists in a Reuters poll.

However, the Q2 figure represents a significant deceleration from the revised 1.3% growth recorded in the first quarter, when robust seasonal farm output lifted the economy. In contrast, agricultural output dipped by 0.1% during the second quarter.

Industrial production saw a 0.5% increase, led by a notable 5.4% rise in extractive industries. The services sector, which makes up about 70% of Brazil’s GDP, expanded by 0.6%, bolstered by a strong labour market.

On the demand front, investments, as measured by gross fixed capital formation, fell by 2.2% after driving growth in the previous quarter. High borrowing costs, resulting from the central bank’s aggressive monetary tightening, contributed to this decline. The central bank has raised interest rates by 450 basis points since September last year to 15%, a near two-decade high, and maintained that level in July.

Government consumption decreased by 0.6%, while household consumption grew by 0.5%, supported by President Luiz Inacio Lula da Silva’s measures to sustain wage growth.

On a year-on-year basis, Brazil’s GDP grew by 2.2%, in line with expectations. The government has projected a 2.5% expansion for 2025, following a 3.4% increase last year.