Bad news for Brazil: Economy contracted 1.7 per cent in the second quarter

Sarah Spickernell
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Brazil has Latin America's biggest economy
Brazil has Latin America's biggest economy (Source: Getty)

Brazil's economy contracted for the third quarter-in a row during the three months to the end of September.

GDP for the Latin American country shrank 1.7 per cent compared to the second quarter, which was a bigger decline than the 1.2 per cent economists expected.

Overall, Brazil's economy is now 4.5 per cent smaller than it was at the end of September 2014. It is also the first time the emerging nation has had three quarterly declines in a row since modern records began in the mid-1990s.

Read more: Fallen hopes for Brazil's economy

Previously, economists predicted a full-year contraction of 4.2 per cent, but the latest figures are likely to pull that higher. In 2014, contraction was 2.6 per cent.

Latin America's largest economy is struggling with rising unemployment and inflation this year, which has reduced domestic demand and dragged the country deeper into recession.

Brazil's jobless rate hit 8.9 per cent in September, which was over two percentage points higher than in September 2014, while inflation is more than 10 per cent. Exacerbating the unemployment situation are high borrowing costs, which the country's central bank lifted last year to their highest levels since 2006.

The real, Brazil's currency, was not significantly affected by the news, remaining steady in early trading.

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