July 4, 2018 / 1:01 PM / in 9 months

UPDATE 1-Brazil industry shrinks the most in a decade due to strike

 (Recasts throughout with details from release, context)
    By Bruno Federowski
    BRASILIA, July 4 (Reuters) - Industrial output in Brazil
plummeted in May at the sharpest pace in a decade, highlighting
the deep impact of a nationwide truckers' strike in the final
weeks of that month.
    Production fell 10.9 percent from April, government
statistics agency IBGE said on Wednesday, the largest decline
since December 2008. Still, the contraction was smaller than the
median 13.8 percent forecast in a Reuters survey of economists.
    Truckers protesting high diesel prices blocked major
highways and forced farmers to dump milk and cull poultry, in an
action that reverberated throughout Latin America's largest
    Losses were widespread, with 24 out of the 26 sectors
tracked by IBGE in negative territory. The only two categories
in the black were coke, oil derivatives and biofuels; and the
extractive industry. Both segments barely rely on highways for
    "The strikes disrupted the production process itself,
through the supply of base materials as well as logistics of
output," IBGE economist André Macedo said.
    Industrial output fell 6.6 percent from the year before, a
more moderate decline than the consensus of an 11.5 percent
    The central bank last week slashed its 2018 gross domestic
product growth forecast in the wake of the strike. Inflation has
soared back to the official target range as a result of product
shortages, while the nation's trade surplus sank.             
    It is not yet clear, however, how long-lasting that impact
will be. The central bank has stressed in recent communication
that increased uncertainty has made it harder to separate
short-term hits from fundamental changes to the economic
outlook, which kept it from signaling future interest rate moves
at its last policy meeting.             
    The bank, which last month kept the benchmark Selic rate at
an all-time low of 6.5 percent, has pointed to a "temporary"
effect of the protests that has slowed down Brazil's recovery
from its deepest recession in a decade.

 (Reporting by Bruno Federowski
Editing by Chizu Nomiyama)
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