LONDON (Financial Times) - Brazil’s economy suffered a technical recession in the first half of this year, with two consecutive quarters of contraction, dealing a blow to President Dilma Rousseff’s bid for re-election in October.

Gross domestic product declined 0.6 per cent in the second quarter, when Brazil hosted the start of the 2014 soccer World Cup, compared with the previous three months, while the first quarter was revised down from positive 0.2 per cent to negative 0.2 per cent, said IBGE, Brazil’s national statistics agency.

Brazil’s benchmark equity index, the Bovespa, rose 0.59 per cent in early trade on hopes that the poor performance would lead to a change of government.

"We believe that this contraction is largely a temporary effect caused by the reduction of business days during the World Cup,” Itaú-Unibanco said in a research report. "However, the data already available for the third quarter show weaker-than-expected recovery.”

Brazil’s economy has been flirting with recession for some time after a series of quarters in which growth has been stagnant, inflation near the top of the central bank’s target range and investment and consumer sentiment weak.

Ms Rousseff and her centre-left Workers’ party are still the favorites to win the election but they face an increasing challenge from Marina Silva, an environmentalist who is emerging as a strong rival, and Aécio Neves, leader of the opposition PSDB party that is seen as more pro-business.