Brazil’s economic momentum hit a wall earlier than expected, sharply decelerating in the second quarter of 2026, a setback that undermines the re-election narrative of President Luiz Inácio Lula da Silva just weeks before the October general election. Gross Domestic Product (GDP) for the April-to-June period grew by just 0.5% compared to the first quarter, a significant drop from the 1.1% expansion recorded in the first three months of the year, according to the Brazilian Institute of Geography and Statistics (IBGE). The primary cause for the slowdown was a 0.4% contraction in household consumption, the first decline in the politically sensitive component of domestic demand in three quarters, clearly showing that high interest rates and elevated household debt are weighing on Brazilian families.