March 11, 2014 / 1:16 PM / 3 years ago

Brazil industry rebounds in January led by capital goods

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A Brazilian worker assembles a Ford car on an assembly line at Sao Bernardo do Campo Ford plant, near Sao Paulo August 13, 2013.Nacho Doce

SAO PAULO (Reuters) - Brazilian industrial output rebounded in January led by a jump in capital goods production, though the advance failed to make up for the sector's sharp plunge in the previous month.

Industrial production in Brazil rose 2.9 percent in January from December, government statistics agency IBGE said on Tuesday, beating expectations for a 2.5 percent rise in a Reuters survey of 31 analysts. Forecasts for the increase ranged from 1.0 to 3.2 percent.

January's advance comes just one month after Brazilian industry posted its steepest monthly decline since December 2008. December's industrial production drop from November was revised on Tuesday to an even further 3.7 percent from 3.5 percent previously.

Manufacturers have consistently been the weakest link in Brazil's economy as they struggle with competition from abroad, high tax and labor costs, and poor infrastructure.

With Brazilian economic growth widely expected to come in below 1.7 percent this year, many businesses have retrenched, cutting back on investment in order to brace for turbulence.

While capital goods production rose 10 percent in January from December, its base of comparison was low following a 12.2 percent drop in December, revised down from a 11.6 percent decline by IBGE on Tuesday.

IBGE also revised December's decline from a year earlier to 2.5 percent from 2.3 percent previously.

Of the 27 industrial sectors surveyed by IBGE, 17 expanded in January from December, including pharmaceuticals, office equipment and machinery.

Automobile production rose for the first month in four, climbing 8.7 percent from December as workers returned from collective vacations.

In broader industrial categories, consumer goods rose 2.3 percent from December while intermediate goods advanced 1.2 percent.

January's industrial production shrank 2.4 percent from a year earlier, while the median estimate in the Reuters survey pointed to a 3.4 percent drop. Estimates for the decline ranged from 1.5 percent to 5 percent.

Economists expect industrial output to grow 1.57 percent this year, according to the median forecast in a central bank poll released Monday. A week earlier, the poll predicted 1.8 percent growth for the year.

Additional reporting by by Rodrigo Viga Gaier and Walter Brandimarte; Editing by W Simon

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