The past month has brought some hope that economic conditions in two of the four BRICs – Brazil and China – might be improving. In China, data on trade, industrial production and investment have all surprised on the upside. Meanwhile, Brazilian industry seems to have had a decent Q2. This is all good news. But by the same token, we don’t think it changes the bigger picture that the BRICs are settling into a period of permanently weaker growth. For a start, the rebound in China has been driven by investment and fuelled by credit. This looks unsustainable. Meanwhile, forward looking indicators suggest that after a strong first half of the year, Brazilian industry may slow in the second half. At the same time, consumer spending is weakening. Finally, it’s worth bearing in mind that economic conditions in the other two BRICs – Russia and India – have yet to show any sign of improvement.
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