Weekly Report 129
Brazil GDP 6
Despite results above expectations, GDP composition does not trigger further revisions for the year. The Brazilian GDP grew 0.4% QoQ s.a. in Q2/2025, above both our forecast and the market median. Growth was driven mainly by services and industry, while agriculture contributed negatively after the strong boost from the bumper crop earlier in the year. From the demand side, domestic absorption declined, reflecting lower investment and government spending. Household consumption still added growth, but at a slower pace compared to Q1. Early Q3 data confirm the narrative of a moderating economy. We expect activity to keep losing momentum in H2, converging to our 2.1% GDP growth forecast for 2025.
Political Context
Trial of Bolsonaro begins, raising questions over Trump’s stance. On September 2, Brazil’s Supreme Court (First Chamber) began the trial of former president Jair Bolsonaro — the first since democratization in which an ex-president faces court for an attempted coup. The trial is expected to last into next week and will be decisive for institutional and legal accountability of those involved. In parallel, following recent U.S. tariffs justified on political grounds, a possible conviction of Bolsonaro adds uncertainty around further restrictive measures by Donald Trump, such as expanding the Magnitsky Act and pressuring banks to comply with sanctions.
U.S. Labor Market / Fed
Weaker payroll data increases chances of additional Fed cuts. The August Payroll showed net creation of only 22k jobs, far below the market median of 75k. The report included significant revisions, with a sharp downgrade in June and a small upward revision in July, showing inconsistency in job creation. Overall, the data points to a weaker labor market, raising the likelihood of a less restrictive stance by the Federal Reserve. Our base case remains two cuts in 2025, but the weak August report increases chances of an additional cut in October as well as potentially more aggressive easing.
