Brazil's supply side economy likely contracted -0.7% yoy in March, -0.4% qoq in Q1

Despite yet another decline, Brazil's industrial production growth in March (-3.5% yoy) was better than expected (-5.1% yoy), suggesting that the economy likely contracted by -0.7% yoy in the same month after falling sharply by -3.2% yoy in February. In fact, given the deep fall in the industrial production in February, economists were positively surprised by the release on economic activity for the month. However, the supply side economy likely contracted -0.4% qoq (-1.7% qoq at annualized rate) in Q1, according to the Societe Generale's March forecast . 

"The demand side contraction of -2.8% qoq (annualized rate) is projected in Q1 versus a contraction of -1.0% in Q4. Clearly, most monthly supply side releases offer some upside risk to the Q1 growth forecast. Full year growth forecast is -1.1% as against no growth in 2014. Numbers apart, the economy is in recession and there is little hope of a near term recovery", estimates Societe Generale. 

All the components of demand - consumption, investment, public spending and net exports -continue to face headwinds and the economy needs either internal (policy reforms) or external (commodity prices and demand) shocks to see a meaningful recovery in the medium-term.