Brazil’s industrial production growth contraction likely slowed in November

Brazil’s industrial production is expected to have shrunk at a slower rate in November. The considerable rate of improvement in the industrial production trajectory stalled in the third quarter of 2016 and the October figure was also disappointing. As such, the industrial production growth continues to be negative and remains a drag on the economy.

However, the robust trade data in November implies that the rate of industrial production contraction slowed slightly in the month possibly recording a growth of -4.4 percent year-on-year or -0.4 percent month-on-month, noted Societe Generale in a research report.

Industrial production accounts for almost 22 percent of the GDP but accounted for almost half of the growth contraction since the end of 2014. While it was anticipated that the sharp Brazilian real depreciation in 2015 would eventually pave the way towards a significant rebound in the manufacturing and IP outlook, the BRL appreciation in 2016 and subdued external demand growth have both held back the resurgence of the production sector in general.

“Beyond the likely bottoming of IP in the next few months, we are not expecting a sustained surge over the medium term”, added Societe Generale.