Surprise Brazil industrial output fall in Feb highlights deeper GDP funk

BRASILIA (Reuters) - Industrial production in Brazil fell in February for the first time in 10 months, figures showed on Thursday, an unexpected decline that adds weight to a growing view that Latin America’s largest economy shrank in the first quarter.

February’s 0.7% fall in industrial output was significantly weaker than the median estimate in a Reuters poll of economists for a 0.4% rise. The following chart shows that several months of slowing growth have finally turned into outright decline.

Graphic: Brazil industrial output

Statistics agency IBGE said the year-on-year rise was 0.4%, also well below the Reuters poll forecast of 1.5% growth.

Brazil is being battered by a second wave of the COVID-19 pandemic. With 67,000 deaths in the month triggering renewed lockdowns, the immediate outlook for industry and wider economy is darkening.

“With the surveys for this month deteriorating and car plants shutting amid the latest COVID-19 outbreak, the data for March and April are likely to be worse still,” said William Jackson, chief emerging market economist at Capital Economics.

“Overall, the risks to our 3% GDP growth forecast for this year increasingly look skewed to the downside,” he said.

The central bank last week raised its 2021 industrial output growth forecast to 6.4% from 5.1%. But the latest survey by the Getulio Vargas Foundation think tank showed that industrial confidence fell in March to its lowest since August.

IBGE said the main drivers of February’s decline were a 7.2% slump in auto and auto parts production in the month, and a 4.7% decline in mining output.

Three of the four major categories saw output fall in February, led by a 4.6% decline in durable goods production, while of the 26 industry segments surveyed, 14 registered lower output, IBGE said.

Brazil’s industrial sector in February was 2.8% bigger than February last year, just before the global COVID-19 pandemic erupted, IBGE said, but still 13.6% smaller than its peak from May 2011.

Reporting by Jamie McGeever; Editing by Bernadette Baum