* FIESP sees spending on machinery plunging
* Economists had forecast less drag from industry this year
SAO PAULO, March 18 Investment in Brazilian
industry is likely to contract 9.5 percent this year, the São
Paulo State Federation of Industrialists said on Monday,
throwing cold water on hopes that rebounding manufacturers could
bolster a fragile economic recovery.
FIESP, as Brazil's most influential industry lobby group is
known, based its estimates on a survey of more than 1,200
companies reporting investment intentions for 2013.
Less spending on machinery and equipment could hamper
economic activity in the short term and contribute to chronic
inflationary pressures, researchers said, as supply falls
farther short of robust consumer demand in Brazil's economy.
Manufacturing has dragged on Brazil's economic growth in
recent years, hurt by weak global demand and structural
challenges such as rising labor costs and poor infrastructure.
Stronger-than-expected industrial growth in January had
contributed to economists' forecasts for a roughly 3 percent
increase in production this year, after output contracted 2.7
percent in 2012. Those numbers were boosted by a passing surge
in heavy truck sales, as well as growth in oil and agriculture
sectors not entirely reflected in the FIESP survey.