After the increase of 5.7% of the GDP (Gross Domestic Product) in 2004, the Brazilian economy had a deceleration, growing 3.2% in 2005.   In current values, the result summed R$ 2,147 billion; and the deflator¹  of the GDP was 7.2%. 

In the analysis of production, the growth of the GDP in 2005 resulted from the increases of 3.0% in the value added²  and  4.4% in the volume of taxes on products, which summed, free of subsidies, R$ 305 billion, with a nominal growth of 10.8% in relation to 2004.  The growth of the total value added was a consequence of the rates of service (3.7%) and industry (2.1%).  Agriculture changed by 0.3%, as a consequence, mainly of the influence of climatic factors.

In the analysis of demand, the final consumption increased by 3.9% in 2005.  The consumption of families increased by 4.5% and the final consumption of the government and of private institutions not-for-profit serving families increased 2.3% each one.   The gross fixed capital formation (GFCF, the same as investments) increased, in volume, 3.6%.  Its prices increased by 5.7%, leading to a growth in value of 9.5%.  The balance of goods and services had surplus, in 2005, of R$ 77.5 billion, surpassing the result of 2004 (R$ 75.3 billion).  The increase of exports, of 1.9% in current values, was higher than the one of imports (1.5%). In volume, exports increased by 9.3%, compared to 8.5% of imports.

In the analysis of income, the expansion of the economy in 2005 led to a growth of 3.0% in the number of job places in the labor market, summing 90.9 million employments.  The annual average income, in current values, reached R$ 9,702 by employment, surpassing nominally in 8.8% the result of 2004.
All these data integrate the definite results of the System of National Accounts (SCN), for the years 2004 and 2005, already according to the new series, published by the IBGE in March of this year.

Services gained participation in the GDP of 2005

In relation to the relative participation in the value added, services gained participation in 2005, increasing from 63.0% to 65.0%, with changes in volume (3.7%) and in prices above the total result of the economy.

The highlight was the activity of financial mediation and insurances, with change in volume of 5.3%, benefited by better credit conditions. Services of real estate and rentals increased 4.7%.  The value of rentals charged by the own residential real estate increased by 4.1%.

In the activity information services, with growth in volume of 4.0%, stood out computer products services (7.1%).  The activities of trade and transportation, storage and mail registered each one increase of 3.5%.  Regarding transportation, the growth occurred due to an increase of 3.7% in the volume of transported cargo and 4.6% in the transportation of passengers.  In relation to trade, the growth occurred due to an increase of 2.6% in the volume of intermediate goods and 3.9% of consumption goods.

Industry grew mainly due to mining and quarrying

In relation to 2004, industry (growth of 2.1% in 2005) lost 0.8 percentage points in the participation in the total value added, which reached 29.3%, in 2005.  The growth of mining and quarrying (9.3%) stood out, occurring, mainly, as a consequence of the increase of 11.7% in the production of petroleum and natural gas and 12.5% in the production of iron ore.

Construction maintained, although in a less intensity, the upward trend which began in 2004, increasing 1.8% in 2005, while the activity electricity, gas, water, sewerage and urban sanitation increased 3.0%.

Manufacturing industry increased 1.2% in 2005, contrasting with the growth of 8.5% in 2004. Considering the activities of major participation, the negative highlights were the manufacturing of resins and elastomers (-13.2%) and steel products (-3.3%).  The performance of manufacturing was also affected by the decrease in the volume of the activities machines and equipment, including repairs and maintenance (-0.9%) and metal products, excluding machines and equipment (-0.3%).  The low growth of the activity food products and beverages (0.4%) also helps to explain the overall index of the manufacturing industry. On the other hand, pharmaceutical products (12.6%), newspapers, magazines and records (8.4%) and cellulose and paper products (7.1%) had positive performances.

 Participation of agriculture in the value added fell from 6.9% to 5.7%

Besides the low growth of agriculture (0.3%), the decrease of 9.0% in the average prices contributed for the decrease of this sector in the value added from 6.9%, in 2004, to 5.7%, in 2005.  The activity agriculture, silviculture and forest exploitation decreased by 0.5% in its value added; on the other hand, livestock and fishing increased by 2.3 %.  The drought in the South Region and in part of São Paulo and Mato Grosso do Sul caused the bad performance of the agricultural harvests, especially wheat (-19.9%), corn  (-16.0%), coffee (-13.2%), tobacco (-3.5%), herbaceous cotton (-3.5%), orange (-2.5%) and rice (-0.6%).

Regarding livestock, the positive results were poultry (5.8%) and hogs and pigs (3.0%).  Cattle herd increased by 1.3%, the lowest of the last years.

Investment rate of economy changed from 16.1%, in 2004, to 15.9% in 2005

In the analysis of demand, the final consumption increased by 3.9% in 2005. The consumption of agriculture goods increased by 1.8%; while the one of manufacturing goods increased by 4.2%. The major increase in consumption was the one of services of financial mediation, insurances and social security (8.3%).

In relation to the composition of the gross fixed capital formation, the trend observed since 2003 was maintained, when the value invested in machines and equipment surpassed the value invested in construction.  In 2005, while machines and equipment answered for 49.9% of the total gross fixed capital formation, construction was responsible for 42.3% and others for 7.9%.  The explication of this phenomenon can be found in the changes of volume as well as in the prices of these aggregates.

The nominal change of the investment in machines and equipment was 14.0%, compared to 5.9% in construction and 2.8% in others.  Although the nominal change of the gross fixed capital formation in machines and equipment was higher than the GDP – which increased approximately 10% -, the performance of the investment in construction led to a total nominal change of the gross fixed capital formation lower than the GDP.  Therefore the rate of investment of the Brazilian economy changed from 16.1%, in 2004, to 15.9% in 2005, despite that, in volume, the GFCF increased more than the GDP.

Exports of durable goods decreased approximately 17%

Analyzing the exports by categories of use, there was decrease only in the export volume of durable consumer goods, approximately 17%.  On the other hand, capital goods increased by 28%, intermediate goods (6.9%) and non-durable consumer goods (5%).

The major increase in the imported volume was of non-durable consumer goods (41%), followed by durable consumer goods (33%) and by capital goods (15.6%).  Intermediate goods, with a result of 0.2%, did not have a significant change and continued stable.

The variation in inventories in 2005 was R$ 5.7 billion, approximately R$ 14 billion less than in 2004, (R$ 19.8 billion). A part of this reduction was a consequence of the bad result of the harvest of agriculture, as for example corn (minus R$ 867 million), wheat (minus R$ 771 million) and coffee (minus R$ 591 million). Therefore, while in 2004 agriculture had an increase of R$ 2.7 billion in inventories, in 2005 there was a decrease of -R$ 1.1 billion.

 Financing capacity decreased by R$ 1.2 billion in 2005³

In 2005, the gross national income was estimated in R$ 2,086 billion.  The growth of the gross national income was higher than the GDP, which can be explained by the increase of 5.3% in the net property income sent abroad, lower than the variation of the GDP, of 10.6%.  The growth of the final consumption expenditures (12.2%) caused savings to increase only 3.9%.  The growth of the capital gross formation (4.7%) above the result of savings led to a decrease of R$ 1.2 billion in the financing capacity, which changed from 1.4% to 1.2% of the GDP in 2005.

Non-financial companies are responsible for 54.5% of the income generated in the country

The continuity of high exports (R$ 324.8 billion), associated to an increase of the domestic consumption, caused the non-financial companies to participate with 54.5% of the total income generated in the country. This result maintained the pattern observed in 2003, when they returned to have financing capacity, something which had not occurred since 1999.  In that year, due to the foreign balance of goods and services of R$ 56.1 billion and the drop of the dollar, the sector had a financing capacity of R$ 25.3 billion.  In 2005, despite the growth of the foreign balance of goods and services to R$ 77.5 billion and the increase of the value of the real compared to the dollar in 20.9%, the financing capacity of non-financial companies was R$ 24.7 billion, slightly less than in 2003.  This occurred due to the increases of taxes on paid properties and income, paid net current transfers and investments done, compared to the growth of the disposable income.

Financing capacity of financial companies increased

The results of the financial companies in 2005 showed the supply of credit in the economy. According to the Central Bank, the hike of the volume of total credit was 45.1% in relation to 2003, standing out the credit for individuals (88.8%).  The prices of the services charged by the financial system increased, on the average, 41.5%, contributing also for the sector to present in 2005, financing capacity of R$ 57.5 billion, 38.9% higher than in 2003.

Public administration had reduction of 25.7% in financing need

The participation of the institutional sector of the public administration in the value added continued stable in 2005, compared to 2003 (15.0% and 15.1%, respectively).  In 2005, the sector had a significant reduction in the financing need of approximately 25.7%, compared to 2003, changing from minus R$ 82.7 billion to minus R$ 61.4 billion.   This reduction can be explained by the continuation of an upward trend of tax collection, with the gross tax burden increasing from 31.9% of the GDP in 2003, to 33.8% in 2005, and by the decrease of interest rates: the average Selic rate changed from 23.08% in the year, in 2003, to 19.15% in the year, in 2005.

The consequence of these two trends was the increase of the current balances of the public administration, especially of the balances of primary incomes, which increased 53.3% in relation to 2003.  The disposable income of the sector changed 47.9% in this comparison.  Gross savings changed from minus R$ 60 billion in 2003 to minus R$ 27.1 billion in 2005, a reduction of 54.8%.

Social benefits received by families increased 25.4% between 2003 and 2005

The value added by the production of the institutional sector families (which aggregates the production of individuals not formalized as companies) increased only 15.3% between 2003 and 2005, while the total value added increased 25.4%.  This variation was considerably lower than the overall average and caused the participation of the sector families in the total generated income to fall almost two percentage points.  On the other hand, the compensations received by employees increased 28.1% in the period, reaching R$ 861.4 billion, which showed a higher formalization of the production.

The social benefits received by the families increased 25.4% between 2003 and 2005, reaching R$ 321.7 billion, being that the sub-item social assistance benefits in cash almost doubled, reaching R$ 15.9 billion, especially assistance to elders and handicapped and the family assistance program Bolsa Família.  In 2005, the final consumption of families reached R$ 1,266 billion, favored by better credit conditions.  The change in current value was 22.7% in relation to 2003, higher than the gross disposable income, which increased 20.6%, reaching R$ 1,323 billion.  As a consequence, family savings decreased 2.4%, changing from R$ 94.6 billion in 2003 to R$ 92.4 billion in 2005.

Family savings finance its gross capital formation (investment), which increased 17.5%, reaching R$ 84.4 billion.  With less savings and more investment, the financing capacity of families fell from R$ 19.9 billion, in 2003, to R$ 4.9 billion in 2005.

Another item with considerable growth between 2003 and 2005 was the interests paid by families.  The expenditures with interests increased 70.9%, reaching R$ 47.4 billion.  With more access to credit, families increased their indebtedness and consequently, had a higher expenditure with the paying of the interests of these loans.

NOTES

1 - Average change of prices in the period in relation to the average prices in the previous period.

2 - Difference between value of production and intermediate consumption absorbed by these activities.

3 - The analysis of the integrated national accounts is done by institutional sectors.  In the commentaries about the macroeconomic aggregates, the base of comparison is the year 2004.  In the analysis of institutional sectors, the reference is 2003, due to the fact of not being available still the data of corporate income tax.