After the increase of 3.2% of the GDP (Gross Domestic Product) in 2005, the Brazilian economy accelerated, with a rate of 4.0% in 2006.  In current values, the result summed R$ 2,370 billion; and the deflator¹  of the GDP was 6.1%.  The GDP per capita reached R$ 12,688 in 2006, a growth of 2.5% in relation to 2005.

Considering production, the growth of the GDP resulted from the increases of 3.7% in the value added ² and 5.7% in the volume of the excise tax.  The major change in volume of value added came from agriculture (4.5%), followed by services (4.2%) and industry (2.3%).

Considering demand, the final consumption increased by 4.5% in 2006, as a result of the increase of 5.3% in the household consumption, of 2.6% in the final government consumption and 1.7% in the consumption of non-profitable institutions serving households.  The gross fixed capital formation (FBCF, the same as investment) recorded the most significant growing rate among the components of demand: 9.8%.  The foreign balance of goods and services had surplus, in 2006, of R$ 68.8 billion, 11.0% lower than in 2005 (R$ 77.5 billion).  The nominal increase of exports, 4.8%, was lower than the one of imports (9.8%).  The same occurred in relation to the volume: exports increased by 5.0%, compared to 18.4% of imports.

Considering income, the expansion of the economy in 2006 led to a growth of 2.6% in the number of employments in the labor market, summing 93.2 million jobs.  The average annual income, in current values, reached R$ 10,551 per employment, 8.8% higher nominally than the result of 2005.
This information can be found in the definitive results of the System of National Accounts (SCN), for the years 2005 and 2006, already according to the new series, which began to be published by IBGE in March 2007.

The activity of services gained participation in the GDP of 2006

Despite that agriculture was the activity which recorded the major growth in volume (4.5%) between 2005 and 2006, in relation to the relative participation in the total value added, services continued gaining participation in 2006, changing from 65.0% to 65.8%, with variation in volume (4.2%) and in price (7.2%) above the total result of economy (3.7% and 6.5% respectively).

In 2006, there was a generalized growth of the activities which form the group services, with positive changes in 13 among 14 activities with the following results.

The activity with major change was, as in 2005, services of financial mediation and insurances (8.4%), due to the increase of credit supply.  The second major increase was recorded by public health (6.8%).  Trade and services of lodging and feeding registered growth of 6.0% each one; and services of maintenance and repair (5.6%) and private health (3.9%) also increased above the average of the gross value added (3.7%).

The lowest annual changes, in volume, were the activities related to public education (-0.2%) and private education (0.4%).  The activities of transportation, storage and mail (2.1%) and information services (1.6%) were among the activities with the lowest growth.

As a consequence of the lowest growth in relation to the average of the economy, in volume as well as in price (3.0% and 3.1%, respectively), real estate and renting services registered loss of participation in the total gross value added, from 9.0% to 8.7%.

Agricuture recovered in relation to 2005

The growth in volume, of 4.5% of agriculture, in 2006, represented a recovery in relation to 2005, when the activity had increased only 0.3%.  Despite this, the participation of agriculture in the total vale added changed from 5.7% to 5.5%, associated to the reduction of 1.4%, on the average, in the price of agricultural products in 2006.

The activity agriculture, silviculture and forest exploration presented a growth, in volume, of 5.3%.  Among the products which registered significant increase in the volume of production stood out corn (21.5%), coffee (20.2%), beans (14.4%) and sugar cane (8.1%) ³ .

The value added of the activity livestock and fishing increased by 2.9%, especially hogs and pigs (3.3%) and poultry (1.4%), while cattle herd had a negative change of 0.1%, in comparison with 2005 ⁴ .

Mining and quarrying continued leading growth of industry

Industry increased by 2.3%, in volume, in 2006, above the result of 2.1% observed in 2005.  Nevertheless, since this growth was lower than the one of the other activities, there was decrease of participation in the total gross value added (from 29.3% to 28.8%).

As it had occurred in 2005, the highlight, in terms of growth, came from mining and quarrying (4.4%), due to increase of gross value added of extraction of iron ore (9.1%) and natural gas and petroleum (3.6%).  The growth above the average, in volume as well as in prices, of the extractive activities led its participation to double in the value added of industry between 2002 and 2006, increasing from 5.9% to 10.1%.  Construction brought the second major rate of change, in volume, in the group industry (4.7%), restarting the trend of growth which began in 2004.  The activity electricity and gas, water, sewage and urban sanitation increased by 3.5%, as a consequence of the increase of 4.0% in the volume of electricity produced.

 The value added of the industry of manufacturing changed, in volume, 1.1%, in 2006, with decrease registered in the volumes of the following activities: coke and petroleum refining and (-7.6%),  articles of apparel and accessories (-5.3%), diverse chemical products and preparations (-10.6%) and manufacturing of steel and derivates (-3.0%).  The major increase was observed in the activity office machines and computer equipment (56.7%).

Household appliances (10.0%), cars, vans and station wagons (8.3%) and furniture and products of diverse industries (6.1%) also had important increases, due to the easy access to credit by families; while dyes, varnishes, enamels and lacs (7.7%) and cement (5.4%) were benefited by the best performance of construction.

 Gross fixed capital formation had a significant hike and increased the investment rate

Analyzing by the demand ⁵ , the growth of 4.0% of the GDP in 2006 was a consequence of the increases of 4.5% in the final consumption and 9.8% in the gross fixed capital formation (FBCF, the same as investment) and a decrease of 37.8%, in volume, of the foreign balance of goods and services.

The increase of the final consumption resulted from the growth of 5.3%, in the household consumption; 2.6%, in the government consumption; and 1.7%, in the non-profitable consumption of institutions serving households.  Regarding goods and services consumed, the major growths were observed in agriculture products (8.2%), followed by financial mediation, securities, complementary social security and related services (7.8%) and by manufacturing industry goods (6.4%).

 The gross fixed capital formation was the component of demand with most significant change in 2006 (9.8%), increasing the investment rate (gross fixed capital formation in relation to the GDP) from 15.9%, in 2005, to 16.4% in the following year.

 The expansion of investment was a result mainly of the performance of machines and equipment, a sector which increased by 14.5% in volume, from 2005 to 2006, representing 51.6% of the FBCF (compared to 49.9% in 2005).  Since 2003 this group increases more than the other groups.

 Construction, as was occurring in previous years, increased less than the other components of the FBCF (4.9% in volume) and diminished its participation, from 42.3% to 40.4% of the national investment.  The other investments maintained their participation stable in 7.9%, with a growth of 5.8% in volume, in 2006.

In 2006, the contribution of the foreign sector for the GDP turned negative

The foreign balance of goods and services brought a surplus in 2006 of R$ 68.8 billion, a result 11.0% lower than the one of 2005 (R$ 77.5 billion).  The increase of value of  10.6% of the exchange rate in the year contributed to decelerate the rhythm of growth of exports, which changed, in nominal terms, 4.8%, while imports increased by 9.8%.  In volume, the exports increased by 5.0% compared to an increase of 18.4% of imports, generating a negative contribution of the foreign sector in the result of the GDP.

As a consequence, in 2006, the contribution of the foreign sector of goods and services for the annual growth, in volume of GDP, turned negative (-1.4%).  On the other hand, the contribution of domestic demand for the growth of the Brazilian economy was 5.3%.

In the imports, all the categories of use had growth in volume, in 2006: 25.5% for capital goods; 25.3% for goods and services for final consumption; and 16.0% for intermediate consumption goods.  In relation to exports, the intermediate goods and services recorded growth of volume of 7.7%, which showed an increase of the foreign demand for these products, while the other categories record low changes, in volume as well as in price.

Net lending of economy fell R$ 4.7 billion in 2006 ⁶

The Gross National Income (GDP plus the incomes of factors of productions sent to the rest of the world or received from the rest of the world) was R$ 2.31 trillion in 2006. In nominal terms, it increased more than the GDP, 10.8% compared to 10.4%, which may be explained by the fact that, for the first time in this decade, there was a decrease in the net payment of property incomes sent abroad in relation to the previous year – of 5.1% -; and, for the first time the dividends sent abroad was higher than the payment of interests – R$ 37.7 billion of dividends compared to R$ 35.6 billion interests.

The nominal growth of the final consumption expenditure (10.6%) in a level similar to the Gross National Income (10.8%) made savings increase by 11.9%.  The nominal increase of 13.8% of the gross fixed capital formation, above the level of savings, together with the decrease of R$ 5.0 billion in the foreign current balance, led to a decrease of R$ 4.7 billion in net lending of the country – which reached R$ 21.449 trillion, changing from 1.2% of the GDP in 2005, to 0.91% in 2006.

Non-financial companies were responsible for 54.9% of the income generated in the country

In 2006, the domestic sector started to have a stronger contribution for the growth of the GDP as a consequence of the hike of the total occupations and the nominal average income (2.6% and 8.8%, respectively), household consumption (5.3%) and gross fixed capital formation (9.8%).  The foreign sector recorded a lower contribution, due basically to the decrease of R$ 8.7 billion in the foreign balance of goods and services. These facts allowed the non-financial companies to participate with 54.9% of the total income generated in the country.

This result maintained, in general, the pattern observed in 2005, with improvement in net lending, which changed from R$ 24.7 billion to R$ 28.4 billion, in 2006.  A decisive contribution for this increase in the foreign sector – despite the decrease in the foreign balance of goods and services – was the increase of the participation of the domestic sector and the favorable exchange rate (in 2006, the average increase of appreciation of the Real was 10.6% higher than the one of 2005), which improved the situation of the companies indebted in foreign currency.

The results of the sector financial companies in 2006 continued reflecting the better credit conditions in the economy.  According to the Central Bank, the revenue of services rendered by the financial system increased by 17.9%, contributing also for a net lending result of R$ 92,1 billion, 60.1% higher than in 2005. Regarding the improvement of net lending of the financial companies stood out the transfer of resources of the government to this sector, in order to compensate the negative result of the Central Bank in 2006.

Public administration increased by 78.9% net borrowing

The participation of the public administration in the total value added was stable between 2005 and 2006: 15.0% and 15.3%, respectively.  In 2006, the public administration net borrowing increased by 78.9%, changing from R$ 61.4 billion, in 2005, to R$ 109.9 billion.

Despite the maintenance of the growing trend of tax collecting – with a gross tax burden changing from 33.8% of the GDP, in 2005, to 34.1% of the GDP, in 2006 - the increase of investments, amounting 28.7%, and the transfer of resources of the government in order to compensate the result of the Central Bank were the main causes of the net borrowing increase.

Another consequence of these two movements was the deterioration of the gross disposable income of the public administration, which changed from R$ 415.2 billion, in 2005, to R$ 424.3 billion, in 2006 – an increase of only 1.1%. The government savings changed from a negative result of R$ 27.1 billion, in 2005, to negative R$ 66.3 billion in 2006, an increase of 144.9% of loss of savings.

Household net lending increased in 2006

The value added by the institutional sector of households (which aggregates the production of individuals not-formalized as companies) increased, in nominal terms, only by 6.4% in relation to 2005, while the total value added of the economy increased by 10.4% - which caused its participation in the total generated income to decrease by 0.8 percentage points.  On the other hand, the compensations received by employees increased by 12.6% in the period, reaching R$ 969.8 billion, showing the continuous increase of the formalization of production.

The net lending of the sector had a significant increase, changing from R$ 4.9 billion, in 2005, to R$ 10.1 billion, in 2006.  Household expenditure with payment of interests increased as a consequence of increase of credit conditions for individuals, but this increase was compensated with the hike in the income of work.

In 2006, the final household consumption reached R$ 1.396 trillion, encouraged by the increase of income and credit.  Its change, in current value was 10.4% in relation to 2005, lower than the gross disposable household income, which increased by 10.9%, reaching R$ 1.467 trillion.  This difference caused the household saving to sum R$ 111.8 billion, in 2006.

Another factor which contributed for the increase of household net lending was the gross fixed capital formation, which increased by 16.1%, less than savings (21.1%), reaching R$ 98.0 billion.  Household savings finances its gross fixed capital formation, and the difference between the growth of savings and investment  leads to the increase of net lending.

NOTES

1 It is the average change of prices of the period in relation to the average of prices in the previous period.

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

3 According to the Municipal Agriculture Production 2006.

4 According to the Municipal Livestock Production 2006.

5 The GDP considering demand is the sum of the final consumption, the foreign balance of goods and services (exports less imports) and the gross capital formation.  This last one may be divided in gross fixed capital formation and variation of inventories.

6 The analysis of integrated economic accounts is conducted by institutional sectors.  In the commentaries about macroeconomic aggregates of the national economy and of the institutional sectors, the reference is 2005.