Brazil's confidence indices for February gives mixed signals amongst relevant sectors. However, it is certain that early bottoming signs are far from signifying a trend of recovery. On the supply side, several indices showed marginal declines. Meanwhile, retail and consumer confidence, on the demand side, rebounded in the last two months. The Brazilian real GDP is expected to contract quarterly throughout this semester. However, the overall indices trend shows that the recession is slightly more contained in 2016 that it was in 2015.

Confidence amongst manufacturing sector weakened slightly by 2% m/m after gaining for two consecutive months. The expectation component witnessed the biggest decline, where confidence dropped 3.7% m/m on seasonally adjusted terms, while the current situation component had a more contained fall of 0.6% m/m sa. The installed capacity utilisation level continued to fall, implying that investments will continue to underperform in the next few years due to the large economic slack.

Confidence amongst services sector also fell, but it is still higher than historical lows. The confidence index for February declined 1% m/m sa to 68.8. The drop in index was split evenly between current situation components and expectations. Confidence in construction sector continues to decline, falling 1.3% m/m sa. It was mainly due to the current situation component, whereas expectation component was nearly flat in February.

Consumer confidence, meanwhile, finally rebounded in February for the second consecutive month. It rose 3.2% m/m sa. The rise was mainly because of expectations, which increased 2.7% m/m sa, and current situation components that grew 3%. This is positive for the retail sector confidence index that continued to grow for the second consecutive month, exceeding the H2 2015 average at 62.5. This was led by the expectations component, whereas the current situation component fell.