November 7, 2011 / 8:06 PM / 8 years ago

UPDATE 3-Brazil auto output barely recovers, sales sink

* Auto sales down 10 pct in October from September

* Auto output rises 1.7 pct after Sept plunge, down yr/yr

* Anfavea holds year-end sales outlook, ups export outlook

By Alberto Alerigi Jr.

SAO PAULO, Nov 7 (Reuters) - Automobile production in Brazil barely recovered in October from a September plunge while sales extended their decline, reinforcing signs of a slowdown in Latin America’s biggest economy.

Sales of new vehicles in Brazil sank 10 percent in October from September, industry group Anfavea said on Monday. Output edged up 1.7 percent after a nearly 20 percent plunge in September, but was down almost 10 percent from a year earlier.

The weak numbers follow a worse-than-expected drop in industrial output in September, due in large part to falling auto output as carmakers idled production lines on overstocked inventories.

Inventories continued to grow in October to 40 days’ worth of sales, from 36 days in September, but Anfavea remained upbeat about carmakers’ prospects for the end of the year.

“I see the industry calm, with perfectly reasonable stocks for the months of November and December,” Anfavea President Cledorvino Belini told journalists in Sao Paulo, citing a traditional boost from end-of-year bonuses and raises.

The association held its full-year sales forecast, which would acquire a sharp jump in November and December sales, and raised the outlook for exports this year due to strong demand in Argentina.

Brazil’s economy has been slowing from breakneck growth of 7.5 percent last year, its fastest pace in 24 years. Analysts see more modest growth this year of around 3 percent and have warned of lower revisions after recent data.

The slowdown comes as global carmakers, who have long relied on Brazil for growth, face stiff competition from newer Asian rivals as well as government demands for new investment if they want to avoid a steep tax hike in December.

Brazil, a country of 190 million where the middle class has grown 25 percent in the past decade, is a key market for the world’s top automakers, such as Italy’s Fiat SpA , Germany’s Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co .

Fiat led the market with 57,130 autos sold, compared to 60,473 in September. VW sold 53,694 units in October, slipping from 59,482 last month.

GM reported 49,820 autos sold, down from 53,677 in September, while Ford sold 22,740 units, versus 25,483 a month before.

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