UPDATE 2-Surprise drop in Brazil economic activity points to weak Q4
(Adds analyst comment, economic impact of Petrobras scandal)
By Alonso Soto
BRASILIA Dec 15 (Reuters) - Economic activity in Brazil posted a surprise drop in October, after Latin America's top economy barely struggled out of recession in the third quarter, central bank data showed on Monday.
The central bank's IBC-Br economic activity index dropped 0.26 percent month-on-month in October in seasonally adjusted terms, well bellow market estimates for a 0.20 percent increase.
The Brazilian economy has remained sluggish since 2011. Global demand for the country's commodities has cooled, inflation has remained stubbornly high and investor sentiment soured due to repeated, often erratic, government intervention in the private sector.
"This is a surprise, nobody expected a contraction in October," said Luis Otavio de Souza Leal, chief economist with Banco ABC in Sao Paulo. "The number suggests we could have another quarter of flat growth, stagnation."
Presidential elections in October also kept some business investments on hold for that month.
After winning re-election President Dilma Rousseff has promised to limit public spending to better control inflation and regain the confidence of investors.
Less public spending, however, could further slow an economy that briefly entered recession in the first half of this year. Continuación...