2015.12.0107:27:00UTC+00Brazil Sinks Deeper Into Recession, Contracts For Third Straight Quarter

Brazil's economy sank deeper into recession and shrunk for a third consecutive quarter during the three months to September amid high inflation and rising unemployment, figures from the statistical office IBGE showed Tuesday.

Gross domestic product declined 1.7 percent from the second quarter, when the economy contracted 2.1 percent, which was revised from 1.9 percent. Economists had expected only a 1.2 percent decrease.

The economy contracted for a third straight quarter for the first time since official records began in 1996. The 2.1 percent shrinkage in the second quarter was the worst since the final quarter of 2008, when GDP dropped 4.1 percent. The economy had returned to recession in the second quarter after a 0.1 percent growth in the final three months of last year.

In the third quarter, private consumption declined 1.5 percent, while state spending grew 0.3 percent. Investments decreased 4 percent and exports dropped 1.8 percent. Imports fell 6.9 percent.

Year-on-year, GDP declined 4.5 percent in the third quarter after a 3 percent fall in the previous three months. That was the sixth decrease in a row.

On an accumulated basis, GDP decreased 2.5 percent in the first nine months of the year.

"There is a reasonable case to be made that Brazil is now enduring its worst recession since 1930-32," Capital Economics economist Neil Shearing said.

Capital Economics lowered its forecast for Brazil GDP for this year and now expects the measure to contract 3.5 percent versus 2.5 percent fall predicted earlier.

"We'll stick with our forecast that GDP may stagnate in 2016, simply because we don't think the drag from investment will be as large over the next 12 months," Shearing said.

The central bank left its benchmark interest rate unchanged at nine-year high of 14.25 percent for a third straight meeting in November. Inflation rose to a 12-year high of 9.93 percent in October.