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Brazil Economic Growth Stays Strong, Supported by Farm Output, Investments

BRASILIA, May 30 (Reuters) - Brazil's economy posted robust growth in the first quarter despite climbing interest rates as fixed investments, household consumption and strong farm output underpinned activity, pushing inflation to a two-year high.

Gross domestic product in Latin America's largest economy rose 1.4% in the January-to-March period from the previous quarter, government statistics agency IBGE said on Friday, in line with the growth forecast in a Reuters poll of economists.

GDP expanded 2.9% from a year earlier, below expectations for a 3.2% increase.

On the supply side, agriculture stood out with a 12.2% gain from the previous quarter, fueled by a bumper soybean harvest.

Services, which make up roughly 70% of Brazil's economy, expanded 0.3% amid a tight labor market, while industrial output slipped 0.1%.

On the demand side, investments measured by gross fixed capital formation stood out with a 3.1% rise from the prior quarter.

Household consumption also contributed with 1.0% growth, supported by measures from leftist President Luiz Inacio Lula da Silva to boost disposable income, including a minimum wage hike. Government spending increased by 0.1%.

The strong economic performance came despite the central bank's aggressive monetary tightening, which has raised the benchmark Selic interest rate by 425 basis points since September, to a nearly 20-year high of 14.75%.

The government expects soaring interest rates to weigh more on economic activity in the second half of the year, projecting GDP growth to slow to 2.4% in 2025 from 3.4% last year.

Reporting by Marcela Ayres Editing by Brad Haynes

Source: Reuters


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