Brazilian Industry Leaves the Worst of the Recession Behind, but the Recovery is Slow

04/05/2017 - 13h59

Brazilian industry is showing signs that it has moved into a phase of stability, after a period of profound recession, but data from the sector supports cautious forecasts related to the speed of the economy's recovery.

According to statistics from IBGE (Brazilian Institute for Geographic and Economic Studies) industrial production increased by 0,1% in February of this year compared to the previous month.

This performance was more in line with expectations of the most pessimistic analysts, who were forecasting a slight contraction of activity in the sector, than of optimistic ones, who were forecasting an expansion of approximately 1%.

On average, the markets were estimating an increase of 0,5%.

Compared to the same month in 2016, industrial production fell by 0,8%. During the last 12 months, the accumulated retraction has been 4,8%.

There were mixed results in different the segments examined by IBGE. Among the 24 industrial areas researched, 13 registered expansion.

Production of machinery and equipment, considered to be an important investment thermometer, for example, increased by 9,8% in February. The automotive segment also registered an expansion of 6,1%.

Sectors that more closely reflect family consumption, like food and beauty supplies, cleaning supplies and personal hygiene, showed a contraction of 2,7% and 3,7% respectively. This data is correlated with unemployment, which is still high.

Although reported results were modest in February, other data related to industrial performance released recently reveals a scenario of initial stability.

Capacity utilization, for example, has increased, although it remains at a very low level measured historically.

Translated by LLOYD HARDER

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