Brazil industrial production rises by 0.8 percent - plus55

Brazil industrial production rises 0.8 percent

The country had its best May in six years. However, experts fear for recent growth’s staying power
Brazil Business

Brazil industrial production grew more rapidly than expected in recent months, growing by 0.8 percent in April. This resulted in the most productive May for six years, according to the Brazilian Institute of Geography and Statistics (IBGE).

This is Brazil’s best May performance since 2011 when industrial production rose by 2.7 percent. In IGBE’s annual comparison, this latest advance is the industry’s strongest since February 2014, at 4 percent.

Both results exceeded the expectations of Reuters economists, who gave their predictions into the news agency in a poll. It represents an increase of 0.6 percent on the monthly basis and 3.05 percent on the annual basis.

Increase in 17 branches of Brazil industrial production

Between May 2016 and May this year, Brazil industrial production has fallen by 2.4 percent in total. Nonetheless, all categories reported gains between April and May 2017. Durable consumer goods did particularly well, posting a gain of 7.6 percent.

Meanwhile, capital goods showed an increase of 3.5 percent for May 2017, in comparison to the month before. Economists and analysts, who use capital goods as an indicator for investments, take this as a good sign.

IBGE said that 17 of the 24 branches it surveyed had increased in production over May. The motor industry performed particularly well, posting a 9 percent increase, its biggest since December last year.

“There is clearly an improvement in the pace of the industry with two consecutive highs that replace the March loss of 1.6 percent,” IBGE economist André Macedo told Reuters. “There has been a widespread increase in production but we are still far from recovering what has been lost.”

Fears over political stability

Despite the recent upturn, economists and investors remain pessimistic regarding Brazil’s near future. With scandals crashing ceaselessly against Brazil’s leading politicians and President Michel Temer heavily implicated, some fear economic gains may falter.

Temer’s accusations are stacking up, from the secret JBS audio tapes to corruption accusations from Attorney General Rodrigo Janot. Analysts are speculating as to whether or not he will remain in power until the 2018 elections.

Even if Temer survives until 2018, he may no longer have the support of his political party or its allies. Without their support, his controversial austerity reforms – which have lured foreign investors back to Brazil recently – may not pass.

“It is important to remember that until May things were going well for the industry, but the research has not yet captured this troubled moment of the country that worsened in June,” Macedo added.

The Getulio Vargas Foundation (FGV) produced the index, based in measures of industry confidence. However, these measurements reinforce fears that recent growth will not sustain. In June, the index fell to its lowest level in four months.