Brazil’s industrial sector rebounds in November, but contribution to economic recovery uncertain

The industrial sector of Brazil rebounded in November from October even if it stayed down when compared with a year earlier. On a sequential basis, industrial output rose 0.2 percent while it dropped 1.1 percent year-on-year. Robust performance in Brazil’s mining/extractive activities sector assisted the country’s industrial sector. Mining/extractive sector rebounded 1.5 percent from October while on a year-on-year basis the print rebounded to 4.5 percent.

The manufacturing sector witnessed another fall in November, falling 0.2 percent sequentially and 2 percent year-on-year. But the all-important automobile production sector indicated some improvement, even if the rebound came from a very low base of comparison. Automobile production rebounded 6.1 percent year-on-year and 13.4 year-on-year rise in three months and the most robust since the sector began to collapse in November 2013.

Therefore these are early signs that the sector has reached bottom and is poised to begin rebounding soon.

“Still, we are not very positive on the speed and strength of this improvement and thus remain cautious on the contribution of the industrial sector on the country’s economic recovery this year”, noted Wells Fargo in a research report.

Looking at it by economic category, industrial production performed better. Capital goods production rebounded 2.5 percent sequentially in November and rose 1 percent year-on-year. In the meantime, intermediate goods production rebounded 0.5 percent sequentially, but dropped 0.7 percent year-on-year. Consumer production sector also recorded a positive rate sequentially, but continued to stay in deep recession on a year-on-year basis.

“Although some of the country’s macroeconomic conditions have improved, especially in the domestic side, with inflation slowing down, there are other aspects of the economy that are preventing the economy from recovering strongly”, added Wells Fargo.

Domestic consumption would advance from lower inflation, but high interest rates are still going to restrict any consumer recovery, while the global economic state is expected to prevent the external sector from leading the way.