Central government total revenues surged in July to R$62 bn, above the consensus of R$57.5bn and also pushing most of the year-over-year rates of growth to the upside. The real rate of growth (IPCA adjusted) went from 7.6% and 7.2% in May and June respectively to 14.7% in July while nominal rolling 12-month rate of growth also accelerated from 15.7% to 16.4%. At the beginning of the year we estimated July YTD revenues of R$400.5 bn, but the figures are already R$406.1 bn. At that point most of the estimates were accompanied by cautious remarks on downside risks as the government failed to approve the extension of the CPMF tax.
The July data shows that most of the surprise came from higher than expected corporate taxes, other revenues and from the IOF tax on financial transactions. The increase in the contribution from the IOF tax can be attributed to higher tax rate and to the increase in consumer credit operations. While total nominal tax revenues increased 18.7% through July, IOF revenues grew by an astonishing 148.3% YTD.
The strong figures suggest a federal government primary surplus of R$7.2 bn in July which will most likely push the public sector consolidated primary surplus to R$11.5 bn in July. If we are right, total primary surplus for the year will amount to R$97.6 bn, quite higher than the R$79.6 bn in the same period of 2007 (22.7% higher in nominal terms and 16.5% in real terms).
The Brazilian public sector accounts can be taken as additional evidence that the economy is still growing quite strongly in 2008. The government should accomplish the public sector target of 3.9% of GDP without problems despite the loss of revenues from the CPMF tax.