Wage dynamics suggest contraction of Brazil consumption GDP

According to data from CAGED, Brazil's employment register 115,599 jobs were eliminated in Brazil in May, compared to the creation of 58,836 positions in May 2014. Wage dynamics remain negative, as the average hiring salary fell by 1.87% y/y, whereas the dismissal average salary increased 0.46%, both in real terms.

Today's report provides another piece of information on the marked deterioration of the labor market. Not only is unemployment  increasing, but the wage dynamics suggest that household disposable income will decrease this year, leading to a contraction of consumption GDP.

"In terms of monetary policy, we believe that the upside surprise in inflation earlier today should prevail in the Copom's reaction function, in contrast to the deterioration of the growth environment, given the board's focus on anchoring inflation expectations." said Barclays