Consumer and business confidence recover more slowly in Brazil

Although consumer and business confidence presented two straight months of recovery after the bottom of the well verified in April, the Brazilian indicator is in an unfavorable situation compared to most economically relevant countries.
According to a survey by the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre/FGV), Brazil started from a lower level of confidence before the crisis and, when considering the magnitudes of the fall and recovery, the country is worse off among about 20 selected economies.
Brazilian industry confidence, for example, fell almost 50% from March to April (about 45 points, almost double the average retreat in the selected countries).
Something similar was seen only in China. The Asian country, however, recovered in March more than 100% of the loss of February (worst month in this case). Brazil did not arrive midway and has slower recovery than virtually all selected countries.
In relation to consumer confidence, the drop was 50 points, almost double that in Japan and Colombia, which ranked second among the countries most affected in this indicator. In this case, Brazil has a recovery rate more aligned with other countries, but that is favored by the lower comparison base.
"If we consider the previous moment of the pandemic and that Brazil is the country that has the highest indicator of uncertainty in the world, this all contributes to us imagining that the recovery of confidence will not be so fast. Brazil will have more difficulty than other countries," says economist Rodolpho Tobler, from FGV Ibre.
According to Tobler, it is very likely that April was even the bottom of the barrel for the economy, but it is not yet known if there will be a new wave of contamination that could reverse the reopening process of recent weeks.
In addition, FGV's surveys consider both the assessment of the current situation and the expectation regarding the future. And the result has been more influenced by the indicator of expectations, because in the current situation it is natural for people to imagine a better future than the present.
The economist also says that the Brazilian consumer is less confident than the business, something that is explained by the high unemployment rates and affects the main pillar of the economy, the consumption of households, which should take time to recover.
According to Tobler, the payment of emergency aid to informal workers contributed to improving consumer confidence, but it was not enough to recover what was lost.
Marcelo Neves, professor at Fipecafi (Fundação Instituto de Pesquisas Contáb, Atuariais e Financeiras da FEA/USP), says that confidence indices and other economic indicators confirm that the economy is in the process of recovery, but the destruction of companies and jobs in recent months will delay this process.
"Apparently, we hit rock bottom and we are on a stability trajectory for improvement. The bad news is that the well is too deep. Now we need to give traction to the economy," neves says.
"It will be very difficult to have a very quick resumption. We were behind the rest of the world before the crisis. And you've had job destruction, income destruction, businesses have closed, stopped collecting taxes. There will be fewer people to push the car."
He says that emergency aid and other government actions were important for this stabilization, but that it is now necessary to slowly withdraw these incentives and, at the same time, seek other forms of state action so that there is a resumption of growth.
Moreover, it states that it is important that society can move in the same direction, despite political problems, and that there is more harmony between the Powers so that reforms that stimulate private investments are approved, as occurred in the recent case of the approval of the new sanitation framework by Congress.
Insper's professor of macroeconomics Eduardo Correia says he sees in confidence indicators, including polls and financial indices such as stock exchange and interest rates, an exaggerated optimism.
He questions the ability of the Ministry of Economy to coordinate an economic recovery process that relies more on government action and criticizes the relaxation of isolation measures by state governments, which it classifies as hasty.
"I am very cautious about the Brazilian case, because here, more than in other economically relevant countries, we have moved in the dark, without testing for Covid-19, with data manipulation by the Ministry of Health," Correia said.
"Brazil is at greater risk than other countries of having a very strong second wave precisely because of premature relaxation. What differentiates Brazil is this lack of planning."