SAO PAULO—Brazilian economic activity declined in June as the country’s economy failed to gain traction amid low consumer and business confidence.

The Brazilian central bank’s economic activity index, or IBC-Br, fell 0.58% in June from the previous month on a seasonally adjusted basis.

In the 12-month period, the IBC-Br fell 1.64%, the central bank said.

The IBC-Br index is widely considered a leading indicator for gross domestic product growth, but it has been criticized for not capturing tepid economic activity.

Economists have reduced their estimates for the country’s economic performance on the absence of signs of a recovery.

According to a weekly central bank survey of 100 economists, Brazil’s economy is expected to contract 2% this year.

The weak performance came against a backdrop of high inflation, at more than 9% year-over-year, well above the 6.5% upper limit of the target range set by the central bank.