Brazilian Industry Registers its Worst Result in two Years

By Richard Mann, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazil’s industrial output dropped at the strongest pace for March in two years, followed by a second quarter in contraction, in an economy that has been showing increasing signs of slowness.

In March, industrial output fell 1.3 percent compared to the previous month, phasing out a gain of 0.6 percent in February, according to data released Friday by the Brazilian Institute of Geography and Statistics (IBGE).

The result was worse than Reuters poll’s expectation of a 0.7 percent decline, representing the biggest decline for the month of March since a drawback of 2.5 percent in 2017.

The industry closed the first quarter registering a contraction of 0.7 percent over the previous period, after dropping 1.4 percent in the three months between October and December.

“The Industry is currently producing the equivalent to what it produced in January 2009, we are on the same level we were 10 years ago. Overall, the industry has been on a downward trend since the middle of last year,” said research manager André Macedo.

In comparison with the same period of the previous year, there was a contraction of 6.1 percent in March, also worse than the expected loss of 4.6 percent and the worst reading for the month in three years on this basis for comparison.

The month of March was marked by generalized negative results among economic categories, with the exception of Capital Goods.

Consumer Goods registered the greatest drop in the month, 2 percent, while Intermediate Goods decreased by 1.5 percent.

The only positive rate was in Capital Goods, 0.4 percent, registering gains for the second consecutive month.

Of the 26 surveyed sectors, 16 had losses and food products were the main negative influence, dropping 4.9 percent.

Also noteworthy was the 3.2 percent drop in vehicle, automotive, trailer and body production, and 1.7 percent in coke, petroleum products, and biofuels.

“The automotive sector was affected by lower exports, stoppage of some units and even the rain that fell in São Paulo affected the production in plants there,” explained Macedo, saying that the rupture of Vale’s tailings dam in Brumadinho (MG) in January was still reflected in the drop in production in March.

Market expectations for Brazil’s economic growth have been undergoing successive reductions, along with the worsening scenario for the industry.

The Central Bank’s latest Focus survey showed that the expectation for 2019 is for industry growth of 2 percent, with a forecast for economic expansion of 1.70 percent.

“We have internal and external issues. There is a high number of unemployed, an environment of uncertainty that results in consumers and entrepreneurs to be cautious when making their investments, as well as exports that also affect the industry with the crisis in Argentina,” added Macedo.