UPDATE 1-Brazil May economic activity virtually flat, falls short of forecasts
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BRASILIA, July 17 (Reuters) - Economic activity in Brazil was practically flat in May from April, central bank data showed on Friday, dashing expectations of a rise after two straight months of declines.
The Brazilian central bank's IBC-Br economic activity index , a gauge of farming, industry and services activity, rose 0.03 percent in May. The indicator was expected to rise 0.2 percent in the month, according to a Reuters poll.
The IBC-Br declined 0.88 percent in April and 1.53 percent in March, according to revised central bank data.
Versus the year-earlier month, the economy activity index fell 3.08 percent in May in seasonally adjusted terms, the central bank said.
In recent weeks, many investment banks have changed their views and now predict a deeper economic recession for this year that could extend into 2016 as confidence continues to plunge on growing political uncertainty.
Growing calls for the impeachment of President Dilma Rousseff and rising tensions with her allies in Congress have weighed on an economy already under stress from years of interventionist policies.
The speaker of the Lower House of Congress is expected to announce his break up with the government later on Friday, in a show of defiance that could trounce Rousseff's legislative agenda and fiscal austerity efforts.
"Rising political noise, amid widening corruption investigations and louder local talk of presidential impeachment, further saps business confidence," BNP Paribas' economist Marcelo Carvalho said in a research note on Friday. Carvalho cut his growth forecast to -2.5 percent in 2015 and -0.5 percent next year.
A widening corruption scandal at state-run oil company Petrobras has led to the investigation of scores of lawmakers, most of them allied to Rousseff. Brazilian police on Tuesday carried out the first search and seizure operations aimed at sitting lawmakers suspected of taking bribes in the corruption scheme at Petrobras.
The scandal has also crimped the country's massive oil and gas industry, hurting activity and sparking job cuts. (Reporting by Alonso Soto and Silvio Cascione Editing by W Simon)
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