Industry Production in Brazil Falls Two Months in a Row

Brazilian industryUnexpectedly, Brazil’s industrial output fell for a second straight month in December. Output in December fell 0.7% from November after a 0.2% decline in the previous month, the national statistics agency IBGE said. 

Record job creation coupled with record credit growth helped Latin America’s biggest economy to grow last year at the fastest pace in more than two decades, according to central bank estimates.

However a tight domestic labor market is also stoking inflation, which accelerated to 6.04% in the year through mid-January, the fastest pace in 25 months.

Production last year increased 10.5%, the biggest increase since a 10.9% expansion in 1986. The country’s industry shrank 7.4% in 2009 amid the global financial crisis.

Manufacturing of capital goods declined 0.5% in December, while production of consumer goods fell 0.9%. Production of electronics and communications equipment fell 13.3%.

The Central bank policy makers raised the benchmark interest rate last month for the first time since July to 11.25%, saying they started a tightening cycle to bring inflation back to their 4.5% target with the help of macro-prudential measures.

According to economists and traders the central bank will raise the Selic rate by at least an additional 50 basis point at its March meeting, probably to 11.75%.

Mercopress

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