Brazil’s industrial production could fall further

During March, Brazil's industrial production (IP) contracted by 0.8% m/m sa, in y/y terms, the IP index fell by 3.5% and, year-to-date, includes a 5.9% contraction. The February data were revised to the downside, now showing a 1.3% m/m sa drop, from 0.9% previously.

Weakness across the board, with all sectors contracting during the month. The markedly weak Q1 15 performance of the industrial sector implies a negative carry-over for the remainder of the year of 4.8%, compared to a drop of 3.2% last year. 

"For April, we expect another drop of industrial production, as the leading indicators we have thus far suggest a prolonged period of weakness: the business confidence index continued to fall, reaching a 16-year low, while the capacity utilization level is also on a downward path." notes Barclays Capital

Inflation expectations and fiscal results are crucial to determine the next steps of monetary policy. All together, this is another piece of information corroborating the markedly anemic growth landscape for Brazil, and tomorrow's Copom meeting minutes is likely to evaluate how the activity outlook is changing the balance of risks for the BCB. 

"As of now, we continue to see it as in a very data-dependent mode, and as such, we expect that the mix of falling industrial production, higher unemployment rate, contraction of real wages, and weakness in retail sales are all arguing for no further rate hikes in Brazil, which is our base case scenario." adds Barclays