Brazil economic activity stagnates as stimulus falters


* IBC-Br index falls 0.12 percent in third quarter

* Index drops 0.01 percent in September from August

By Silvio Cascione

SAO PAULO, Nov 14 (Reuters) - Brazil's economic activityfailed to grow in September and showed a decline in the thirdquarter, central bank data showed on Thursday, the latestevidence that a timid recovery boosted by rising governmentspending was short-lived.

The central bank's IBC-Br economic activity index stood largely unchanged in September from August,with a decline of 0.01 percent in seasonally adjusted terms. Themedian estimate in a Reuters survey of 21 analysts was for anincrease of 0.3 percent.

The index, a gauge of activity in the farming, industry andservices sectors, fell 0.12 percent in the third quarter,compared with an increase of 0.84 percent between April andJune.

The IBC-Br is seen as a proxy of gross domestic productdata, even though it failed to capture a strong rebound ineconomic growth in the second quarter. Third-quarterGDP data is due on Dec. 3.

Brazil's economy gained steam in the first half of thisyear, escaping from a near-recession after President DilmaRousseff's government cut taxes, slashed interest rates andboosted public spending. However, that stimulus has been partlywithdrawn as it fueled inflation and raised the threat of acredit downgrade because of the spending spree's impact ongovernment finances.

Economists in a weekly central bank poll expect Brazil'seconomy to grow a median 2.5 percent in 2013 and 2.1 percent in2014.

Over September 2012, the IBC-Br index rose a nonseasonallyadjusted 3.33 percent.

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