Our leading indicator for Brazil continues to imply significantly higher growth in Brazil and the economy is starting to respond.  Of course, recent positive growth surprises have taken a backseat to the increase in EM market volatility .  The Brazilian real has weakened, equities have sold off and yields have risen driven by a rise in US 10y yields.  That together with a hawkish central bank has added to the squeeze on economic activity.

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However and despite the almost universal bearishness on Brazil, we note that coincident activity has started to turn up strongly in line with our leading indicators.  This is a contrarian sign for an economy where the equity market is down 26% in USD terms since the end of May.