In Brazil, after a sharp contraction (-5.4% y-o-y) in economic activity in Q1, there is very little to suggest a tentative recovery began in Q2. All the evidence implies that the economy continued to shrink sharply. Bolstering the downbeat near-term outlook is the fact that the central bank’s IBC-Br index, seen as a proxy for monthly GDP growth, fell by a seasonally adjusted -0.5% (m-o-m) in May, reversing the revised increase of 0.1% in the prior month. In y-o-y terms, economic activity contracted by -4.9%, which was similar to the -5.0% decline posted in April. In addition, other leading indicators remained downbeat, with May retail sales plunging by -9.0% (y-o-y) and -1.0% (m-o-m). Weakness in the sector underscores decelerating consumption growth against a backdrop of high interest rates, a slack labour market and government austerity measures. On the external front, the country’s crippling recession has continued to drag down imports, which fell by -15.4% (y-o-y) in June to US$12.8bn. The steeper drop in imports (versus a decline of -14.7% y-o-y in exports to US$16.7bn) resulted in a trade surplus of US$3.97bn last month. Consensus GDP expectations remain in contractionary territory for this year.