Brazilian Industry’s Confidence in Economy Falls Again to a 3-Year Low

Brazil’s Industrial Entrepreneur’s Confidence Index (Icei), announced yesterday, July 19, by the National Confederation of Industry (CNI), dropped for the second quarter in a row, to its lowest level since October, 2002.

According to the economic coordinator of the CNI, Flávio Castelo Branco, the decline “reflects the atmosphere of uncertainty that has pervaded the political sector in the last two months, as well as the deceleration of the economy over the course of the first semester in consequence of higher interest rates.”


According to the CNI bulletin, the index reached 50.7 points, 5.1 points lower than in April and 14.2 points lower than in January, when the index stood at 64.9 points.


Despite the drop, an Icei above 50 points is still considered an indication of entrepreneurial confidence, despite the more modest growth in economic activity in the first half of the year in comparison with the same period of 2004, as illustrated by the fact that the economic reference index was also down, from 62.7 points in January to 45.9 points in April and now to 36.4 points.


There was also a decline in entrepreneurs’ expectations regarding the resumption of production activities in the coming semester, from 60.6 points in April to 55.7 points at present.


But the CNI economist observes that, although the indicators are not as high as in previous months, they still remain high, and this suggests that expectations with respect to company performance continue to be positive.


According to Castelo Branco, confidence is the basic element in investment decisions.


“A decline in confidence can indicate indecision when it comes to resuming some industrial investment projects. Nevertheless, it is possible that, despite this, we are just experiencing a momentary situation and that, with the revival of the economy in the second half of the year, a reactivation of investments is possible.”


ABr – www.radiobras.gov.br

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