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UPDATE 2-Brazil industry output plunges in Dec but up slightly in 2013
February 4, 2014 / 12:55 PM / 4 years ago

UPDATE 2-Brazil industry output plunges in Dec but up slightly in 2013

* Industry advances 1.2 pct in 2013 vs 2.5 pct drop in 2012
    * Dec output falls 3.5 pct from Nov, far below forecasts

    By Asher Levine
    SAO PAULO, Feb 4 (Reuters) - Brazilian industry advanced
slightly in 2013 though December's figures came in far worse
than expected as capital goods output plunged, suggesting one of
the weakest parts of Brazil's economy will likely continue to
drag on economic growth.
    Industrial production in Brazil advanced 1.2 percent in
2013, government statistics agency IBGE said on Tuesday. While
the figures were up from a 2.5 percent decline in 2012, they
have been uneven throughout the year.
    After several months of muted swings in either direction,
industrial production dropped 3.5 percent in December
from November, the worst monthly decline for Brazilian
manufacturing since Dec. 2008, IBGE said. The drop exceeded all
estimates in a Reuters survey of 24 analysts, who predicted a
1.5 percent decline according to their median forecast.
    Automobile production fell for the third straight month,
sinking 17.5 percent from November as collective vacations
weighed on output, IBGE said.
    Capital goods production, which finished 2013 with a 13.3
percent gain, shrank 11.6 percent in December from November,
suggesting businesses have slashed investment in new capacity as
confidence in future growth remains low.
    Manufacturers have consistently been the weakest link in
Brazil's economy as they continue to struggle with competition
from abroad, high tax and labor costs, and poor infrastructure.
    "In spite of signs of pick-up in consumption, the sector
apparently cannot cope with domestic demand requirements, and
has been hit by the problems in Argentina as well," wrote
Alexandre Schwartsman, head of economic consulting firm
Schwartsman & Associados in Sao Paulo, in an investor note.
    Brazil sent 8.1 percent of its exports to neighboring
Argentina in 2013, mostly manufactured goods. A sharp
devaluation in the Argentine peso in recent days has
made Brazilian products more expensive, sapping demand.
   While Brazil's currency, the real, itself weakened
about 13 percent last year, local manufacturers have not seen a
considerable increase in demand from abroad. Instead, inputs
have become more expensive, while fierce competition has led
many to avoid passing higher prices on to customers.
    With Brazilian economic growth widely expected to come in
below 2 percent this year, many businesses have retrenched,
cutting back on investment in order to brace for turbulence.
    "It seems clear that one should not expect a large
contribution from the industrial sector to GDP in 2014,"
Schwartsman added. 
    December's industrial production shrank 2.3 percent from a
year earlier, below all forecasts in the Reuters
survey. Estimates ranged from a 0.8 percent increase to a 1.2
percent decrease.
    Economists expect industrial output to grow 2.0 percent this
year, according to the median forecast in a central bank poll
released Monday. A week earlier, the poll predicted 2.2 percent
growth for the year.
    Of the 27 industrial sectors surveyed by IBGE, 22 contracted
in December from November, including machinery and equipment,
pharmaceuticals, and oil refining.
    In broader industrial categories, consumer goods fell 2.5
percent while intermediate goods dropped 3.9 percent.
    IBGE also revised some data from the previous month.
November's industrial growth from a year prior was revised to
0.3 percent from 0.4 percent previously, while November's
decline from October was revised to 0.6 percent from 0.2

 (pct change)                   Dec/Nov    Dec'13/Dec
 Capital goods                      -11.6         1.8
 Intermediate goods                  -3.9        -2.0
 Consumer goods                      -2.5        -3.2
     Durable consumer goods          -3.0        -3.5
     Semi-durable and                -2.3        -3.1
 non-durable consumer goods                
 Industrial output                   -3.5        -2.3

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