September 2, 2014 / 1:00 PM / 5 years ago

UPDATE 2-Brazil's industrial output rises, snaps five-month slump

(Adds Mantega comments, PMI data)
    RIO DE JANEIRO, Sept 2 (Reuters) - Brazilian industrial
output rose in July following five straight months of declines
though gains were slight as the country's economy continued to
    Output at factories and mines rose a seasonally
adjusted 0.7 percent in July from June, statistics agency IBGE
said on Tuesday. That surpassed expectations of a 0.5 percent
increase forecast, according to a Reuters survey of 20 analysts.
    Industrial production had fallen 1.4 percent in June from
May, partly due to the World Cup soccer tournament. Factories
idled production during some game days in the month.
    "Two things explain July's growth: The end of holidays in
June granted for the World Cup, and a low basis of comparison,"
said Andre Macedo, an economist with IBGE. "It's too early to
talk about a recovery in industry ... it just took a small step
up from a low place."
    Brazil's economy entered a recession in the first half of
the year, primarily due to a contraction in the manufacturing
sector despite a string of tax breaks and other government
subsidies. As growth cooled, manufacturers have been
increasingly affected by competition from abroad while they
continued to struggle with high taxes and labor costs at home.
    Industrial output is expected to drop 1.7 percent in 2014,
which could send unemployment higher, according to many
    Finance Minister Guido Mantega sought to play down the grim
economic data of late, telling reporters on Tuesday: "The
economy is not stuck." 
    "There were some temporary problems in the first half of the
year and in the second half we are heading in the direction of a
gradual improvement," he said, citing the industrial production
    Capital goods production jumped 16.7 percent in July from
June, while intermediate goods such as textiles and chemicals
retreated 0.3 percent. Durable consumer goods such as furniture
and home appliances rose 20.3 percent.
    July industrial production was down 3.6 percent from a year
earlier, better than the 3.7 percent decline
forecast in the Reuters poll.
    Purchasing managers' index data released on Monday showed
Brazil's manufacturing activity expanded in August as the
negative impact of the World Cup continued to wear off.

    (For details on the IBGE industrial output figures see - in
Portuguese: here)

 (pct change)                 July/June   July'14/July'13
 Capital goods                16.7        -6.4
 Intermediate goods           -0.3        -3.6
 Consumer goods               7.1         -2.8
     Durable consumer goods   20.3        -13.7
     Semi-durable and         0.7         0.6
 non-durable consumer goods               
 Industrial output            0.7         -3.6
 (Reporting by Rodrigo Viga Gaier in Rio de Janeiro and Luciana
Otoni in Brasilia; Writing by Asher Levine; Editing by W Simon
and J Benkoe)
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