WEEKLY REPORT Activity loses momentum in Brazil as Middle East tensions raise global risks – Mar 06
✅ Domestically, the data released throughout the week reinforce a narrative of gradual economic slowdown, still partially cushioned by the resilience of the labor market. GDP in the fourth quarter of 2025 grew 0.1% QoQ s.a., broadly in line with expectations, bringing full-year growth to 2.3%. While the headline result came close to forecasts, the composition points to weakening domestic demand, particularly through softer private consumption and domestic absorption at the margin. Still, labor market indicators continue to point to a relatively resilient backdrop. Overall, the data highlight sectoral heterogeneity, with segments linked to services and the labor market still showing resilience, while more cyclical areas of activity are already displaying clearer signs of weakening, in line with the Central Bank’s recent assessment.
✅ In the United States, the February payroll report delivered a significant downside surprise, reinforcing signs of moderation in the labor market and potentially placing the Federal Reserve in a more delicate position in the conduct of monetary policy. The report showed a net loss of 92k jobs, well below expectations for job creation, alongside downward revisions to January and a sharp decline in the three-month moving average. The deterioration was relatively broad-based, with contractions in both the goods and services sectors, particularly in education and health, leisure and hospitality, and information, the latter still reflecting adjustments linked to the adoption of artificial intelligence technologies. Overall, the data reinforce the view of a labor market losing momentum at the margin, with uneven sectoral dynamics and job creation increasingly concentrated.
✅ Finally, the sequence of developments throughout the week points to a rapid escalation of the conflict in the Middle East, raising the risk of a more prolonged confrontation with potentially significant implications for global energy markets and financial assets. On the energy front, conditions in the Strait of Hormuz have deteriorated markedly, with a sharp reduction in maritime traffic and several tankers waiting inside the Persian Gulf due to the elevated risk of attacks and navigation disruptions. In financial markets, the escalation in the conflict pushed oil prices higher, increased global risk aversion, and led investors to scale back expectations for Federal Reserve rate cuts, strengthening the US dollar and pushing Treasury yields higher.
