* Steel industry, No. 1 airline reduce growth outlook
* U.N. body cuts 2011 GDP outlook to 3.5 pct from 4 pct
* Industry group warns of possible contraction
By Jose de Castro and Rodrigo Viga Gaier
SAO PAULO/RIO DE JANEIRO, Aug 30 (Reuters) - Brazil's
economy showed new signs of a slowdown on Tuesday as
steelmakers slashed their growth forecasts, the country's No. 1
airline scaled down its expansion plans and a new poll showed
growing pessimism in the battered manufacturing sector.
The Brazil Steel Institute cut its outlook for steel output
this year to 36.3 million tonnes -- still 10.5 percent above
production levels in 2010 but well below the 39.4 million
tonnes it had previously forecast. For more, see:
The revision reinforces a recent trend: While Brazil is
still posting growth rates far above most of the developed
world, optimism has begun to fade in several sectors. Some of
the darker outlook is due to global problems, but Brazilian
consumers and manufacturers are also showing clear signs of
fatigue after the credit-fueled expansion of recent years.
The United Nations' economic body for Latin America, known
as ECLAC, on Tuesday became the latest entity to cut its growth
forecast for Brazil. It now expects 3.5 percent growth this
year, down from a previous 4 percent forecast and well short of
the 7.5 percent expansion seen in 2010. [ID:nSAG003012]
"A yellow warning light is going off," said Paulo Francini,
head of economic research at the FIESP industry group in Sao
Paulo. "Industry is losing steam, and that's going to show up
in employment too."
For pdf on Brazil economy slows
A Reuters poll showed that analysts expect the economy grew
at a 3.2 percent annual pace in the second quarter. The
official data will be released on Friday. [ID:nN1E77T0WS]
The slowdown is broad, and even extends to booming areas
such as domestic air travel that have symbolized the emergence
of Brazil's rising middle class in recent years.
TAM TAMM4.SATAM.N, Brazil's largest airline, said it
was reducing its projected fleet at the end of next year to 159
planes rather than 163, as previously expected. CEO Libano
Barroso said the move would save $50 million annually in line
with "a more modest market" than expected. [ID:nN1E778130]
Barroso said he still expects 15 to 18 percent demand
growth in 2012 -- superb by most standards, but below the 21
percent growth seen in Brazil's passenger traffic in 2010.
A slowdown has been welcomed by some economists and
government officials who had worried about potential asset
bubbles in Latin America's biggest economy. One of the most
closely watched sectors -- real estate -- seems to be coming
back to earth, as new home sales in Sao Paulo fell 31.3 percent
in the first half of the year compared with a year ago, the
Secovi-SP industry group said on Tuesday.
SLOWDOWN WORSE IN MANUFACTURING
Yet many are unhappy with the slowdown. Brazil's economy is
now expected to grow at a slower pace in coming years than
other economies in the BRIC group of large emerging markets,
which includes China, Russia and India.
Brazil could grow more slowly than any other major Latin
American economy in 2012, according to the International
Monetary Fund. That outlook has prompted some local investors
to pressure President Dilma Rousseff's government to make tax
reforms and other changes that could lead to higher growth,
although a political crisis makes major reforms unlikely.
In certain areas of the economy, some are even talking of a
contraction in coming months.
A new FIESP study showed a darkening outlook for the
manufacturing sector, which was a laggard even during the boom
years, due to Brazil's high logistic costs and an overvalued
FIESP's INA activity index for July rose 0.3 percent on a
seasonally adjusted basis compared with June. Yet the group
also released a poll showing confidence among manufacturers
slipped to its lowest level since December.
The poll "says there's bad weather ahead," Francini said,
adding the INA could turn negative by the end of the year.
The strong real, and slowing economic growth generally, has
led to pressure from some Brazilian sectors for greater
protections for critical industries.
"We need to protect our domestically produced steel, we
need to defend our jobs and not create jobs for the Chinese,"
said Catia Mac Cord, director of marketing and economy for the
Brazilian Steel Institute.
Consumer spending is also starting to slow down, due in
part to rising interest rates. The central bank has raised the
benchmark Selic rate five times this year to 12.5 percent,
hoping to subdue inflation that has run hot because of the
breakneck economic expansion last year.
Rousseff expressed hopes on Tuesday that the Selic could
come down soon as the economy cools. But economists believe the
bank will leave the rate unchanged at Wednesday's regular
rate-setting meeting since wage pressures remain intense.
Brazil's main credit card industry group, ABECS, said it
still expects revenues among companies operating in the sector
to grow between 20 and 23 percent this year. However, ABECS
President Claudio Yamaguti said the growth would be due more to
"changes in consumer habits" -- such as reduced use of checks,
and the spread of automated payment -- than economic growth.
(Additional reporting by Vivian Pereira, Brian Ellsworth, and
Aluisio Alves, Writing by Brian Winter, editing by Dan