The growth rate compared to 2006 (6.1%) was due to the positive performance of Services (6.1%), Industry (5.3%) and Agriculture (4.8%).

In 2007 Brazilian economy presented a 6.1% expansion in volume of the Gross Domestic Product (GDP) compared to the previous year. In current values, the achieved result was R$ 2.661 trillion, and the GDP-deflator, 5.9%. In this period, per capita GDP reached R$ 14,183.11.

The 6.1% GDP growth was due to an increase of 6.1% in Services, 5.3% in Industry and 4.8% in Agriculture. Excise taxes (6.2%) grew more than Gross Value Added (GVA) (5.8%), being Import Tax (24.2%) and Value Added Taxes (VAT) (7.9%) the ones to increase most.

Agriculture – This activity presented a growth in volume of 4.8% in GVA, in comparison to 2006, that may be explained mostly by crop performance in 2007.

The participation change of Agriculture in economy GVA (from 5.5% in 2006 to 5.6% in 2007) is due to, besides the growth in volume, the rise of 8.8% in average commercialization prices.

In the activity Agriculture and Forestry, an increase in volume of 6.6% in GVA is observed. GVA of Livestock and Fishing increased by 1.0% in volume in 2007, a figure below the 2.9% observed in 2006. Despite the increase in the number of fowls and hogs and pigs (11.5% and 2.2%, respectively) in comparison to the previous year, there was a reduction of 3.0% in the number of cattle heads, according to data from IBGE survey Municipal Livestock Production 2007.

Industry – The growth of Industry is explained principally by the performance of Manufacturing Industry, whose increase in volume was 5.6% in 2007, compared to just 1.0% in 2006. The increase in GVA volume of Manufacturing Industry was more generalized: 28 of the 34 activities that form Manufacturing Industry presented a rise in 2007, compared to 22 activities in 2006.

The outstanding industrial activities were: Agrochemicals (23.1%), Other equipment of Transportation (19.0%), Machines and Equipment, including Maintenance and Repair (17.5%) and Office Machines and Computer Equipment (14.3%). Besides the production of machines and computer equipment, other industries related to the investment also had positive performances, enabling an increase of 13.9% in Gross Fixed Capital Formation (GFCF): Trucks and Buses, and Automobiles, Pickups and Vans increased, respectively, 14.9% and 10.8%, whereas the GVA of the activity Cement, main input of Civil Construction, increased by 9.2%.

Civil Construction kept the upward trend initiated in 2004. The activity increased by 4.9% in 2007. Both segments of Civil Construction recorded a rise: the construction of buildings, stimulated by the increase of real estate credit and by the expansion of family income, grew by 5.9%, whereas the production of “other construction products”, which include great infrastructure works, recorded a slightly inferior increase: 5.0% in the year.

Services – In 2007, the performance of activities that constitute the group Services in the System of National Accounts (SNA) was above that of 2006. Among the 15 activities of this group, nine recorded higher variations in volume than those observed in the previous year. These results guaranteed the 6.1% growth in volume of its added value in the year. On the other hand, price increases in this group (7.3% in the total group) contributed to the increase of 13.9% in the GVA at current prices in 2007.

The activity with the highest volume variation in 2007 was that of Financial mediation, insurance, complementary social security and related services (15.1%); next come Services of maintenance and repair that presented an 8.9% growth in volume. Commercial Education (0.9%) and Public Administration and social security (3.3%) were the activities with the lowest positive variations. Household services (-0.9%) and Public Education (-3.3%) were the only activities with negative rates in the year.

Trade – The activity Trade recorded an 8.4% growth in volume compared to 2006 (Table 2). Positive influences on the performance of Trade were the continuous expansion of credit (principally for the acquisition of automobiles and the credit directed to civil construction) and the depreciation of the dollar against real, reducing the prices of imported products.

Viewpoint of demand

From the viewpoint of demand, GDP growth resulted mainly from the 5.8% increase of final consumption expenditure in volume. The increase of 6.3% in household consumption expenditure was stimulated by the growth of 5.4% in real salary volume. Moreover, there was an 18.8% nominal increase in the balance of credit transactions of the financial system with free resources for the natural person. General government consumption expenses (5.1%) and GFCF (13.9%) also grew, the last one positively affected by a 6% average reduction on import costs of capital goods.

In 2007, GFCF had the greatest real variation between 2003 and 2007, and for the second consecutive year kept a higher expansion than the other components of demand. The 13.9% increase in volume, in face of the 4.7% price increase caused a 19.2% rise in current value. Consequently, the investment rate (GFCF/GDP) increased by 17.4% in 2007.

The investment performance was stimulated by machines and equipment, which have presented higher growth than the other categories of GFCF since 2004 and reached the proportion of 54.1% of total. This segment obtained, in the year, a 24.9% rise in value due to the 22.0% variation in volume and the 2.4% in price.

Civil construction, which encompasses from infrastructure works to residential constructions, had its participation reduced from 40.4% in 2006 to 38.3% of total GFCF in 2007. The 13.0% increase in current value resulted from a real change of 5.5% and from a price increase of 7.1%.

In 2007, the result of Foreign Current Balance was unprofitable, after four consecutive years of surplus. The negative balance of R$ 6,592 million happened principally because of the decrease of foreign balance of goods and services. Although exports have surpassed imports in R$ 40,390 million, this result is 41.3% smaller than that recorded in 2006 (R$ 68,778 million). Part of this result is explained by the 10.5% increase in exchange value between 2006 and 2007 and by the dynamic internal economy.

In real terms, imports of goods and services grew by 19.9%, whereas exports increased only 6.2%, leading to a negative contribution of the foreign sector to GDP (-1.5%).

For imports, all categories of use presented a substantial rise in volume , with highlights being capital goods, which grew by 43.0%, indicating that the valued real favored the investment level in machines and equipment by economic activities.

Exports of capital goods also increased (8.4%), especially due to the result of the activity other equipment of transportation – stimulated by sales of aircrafts; trucks and buses; and electronic material and communication equipment, accounting for half of the exported total of this category.

Viewpoint of income

The 1.6% expansion in the number of occupations between 2006 and 2007 corresponded to 1.5 million new job posts. In relative terms, Industry stood out with the expansion of 4.2% in the number of vacancies.

Formalization growth and the real increase of workers’ income have also been qualitative determiners of a considerable improvement of working conditions. Results of formal employment in 2007 confirm this movement, with a 4.3% rise in occupations with a contract¹, far superior to those without formal contract: own-account workers (0.1%) and employees without contract (-1.2%).

Workers’ income has been presenting increases since 2003. The compensation of both employees and workers had, in 2007, significant rises (13.5% and 13.1%, respectively).

The distribution of the generated income among capital, labor and public administrations did not suffer significant alteration in comparison to 2006. Among the components of the factor labor, the compensation of workers represented 41.3% income, whereas the mixed income, 9.0%. The proportion of compensation of the factor capital, represented in the gross operating surplus, corresponded to 34.4%, and the one relative to public administrations, 15.2%. Yet, we must emphasize that the piece of workers’ compensation has been on an upward trend in the last three years, reflecting the positive market evolution in the period (Graph 4).

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¹ In 2007, among the groups and activities published by SNA, Industry outstood with the greatest expansion in the total formal occupations (6.0%), and particularly in this segment, mining and quarrying industry, with 9.8%; and Construction, with 7.5%. In Services, where occupations with formal contract increased by 4.1%, the highlights were real estate activities and rent (18.1%), and information services (10.3%).