Brazilian GDP falls by less than expected in the first quarter

Brazil´s economy continued to shrink at the start of the year with private consumption registering a steep drop, but some economists were optimistic that the worst may now lie behind.

Gross domestic product declined by 0.3% quarter-on-quarter in the first three months of the year following the contraction of 1.3% seen over the prior three months.

Nevertheless, that was better than the 0.8% drop in activity which economists had penciled in.

Gross fixed capital formation registered another sharp fall, decreasing by 2.7% over the quarter, yet that was nearly half the 4.8% collapse observed over the prior three months.

Real household spending on the other hand plumetted 1.7% in terms of quarterly rate of change, following on the heels of a 0.9% drop observed in the last quarter of 2015, as households were faces by worsening conditions in the labour market and persistenly high inflation, said Andres Abadia, senior international economist at Pantheon Macroeconomics.

Reflecting weak domestic demand, imports plunged 5.6% even as export sales rose 6.5%, boosted by the depreciation in the country´s currency, the real, in 2015.

"The GDP data confirm that the intensity of the recession is diminishing, at last. The rate of decline of GDP is slowing, and leading indicators in recent weeks show that the collapse in investment is easing," Abadia said.

"Moreover, confidence indexes are stabilizingalbeit at low levels—suggesting that the worst is likely behind us, although risks are still to the downside. The economy will remain very weak in the foreseeable future, though, due to the lagged effect of the tightening cycle, still-low confidence and elevated political uncertainty."