Slowdown in Brazil is partly due to consumer credit saturation

8 Jun 2012 by Jim Fickett.

Last November I noted that credit to individuals in Brazil had grown at a truly extraordinary rate 2003-2009, that this was partly responsible for the booming economy, and that the credit growth was probably beginning to slow (Demand growth in Brazil driven partly by a one-off pop in household credit).

In fact the Brazilian economy has indeed slowed considerably in recent quarters. The following graph shows the level of real GDP, seasonally adjusted, through Q1:

One major cause of GDP leveling off is a slowdown in the growth of consumer expenditures:

And this in turn is no doubt in part due to a slowdown in growth of credit to individuals:

(All data and graphs from Brazil's Central Bank.)

The government, not surprisingly, is looking for ways to encourage consumers to borrow more. However the carrying cost of existing debt is already very high, and this may or may not work.