Brazil's supply-side likely contracted by -1.0% mom in April

Brazil's industrial production has sharp declined to -7.6% yoy. 
"The fall in industrial production growth leads to project an overall supplyside contraction of -2.7% yoy in April. The economy likely also contracted heavily in April on a sequential basis, implying growth in Q2 will likely be considerably worse than in Q1", says Societe Generale in a report on Friday. Currently the economy seems to contract by -6.6% qoq (annualised rate) in Q2," forecasts Societe Generale. 

Q1 demand composition suggests that consumption will be a net drag to growth after a long time on the full year basis. The weakening labour market and lower social security spending are set to affect consumption growth this year while private investment will continue to subtract from GDP. Finally, public spending will also contribute negatively to demand growth as the government tries to bring its fiscal house in order. 

The surge in real exports growth on the back of BRL depreciation and the resulting gain in net exports is likely to be the only positive factor contributing to growth in 2015, expects SocGen. However, it is unclear at this stage whether the improvement in net exports will help increase investment momentum, particularly when other segments of demand remain so weak.