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Brazilian Industrialists Show Very Cautious Optimism

After expressing uncertainty over the directions of the Brazilian economy in July, Brazil’s industrialists raised their spirits in the beginning of October.

But the sector remains cautious when it comes to deciding to invest more in production, according to the preliminary findings of the Conjunctural Survey of Manufacturing Industry, conducted by the Getúlio Vargas Foundation’s (FGV) Brazilian Economics Institute (Ibre).

The study is carried out on a quarterly basis, and the results announced Thursday, October 13, reflect opinions gathered between September 29 and October 10 from representatives of 417 companies in 24 states. Most of the companies are medium or large-sized, and their combined annual sales amounted to US$ 79 billion in 2004.

When asked about the current business situation, their answers show a degree of balance, unlike the previous survey, when a much larger number considered the situation to be weak.

In July, 37% of the respondents regarded the business situation as unfavorable, while 14% expressed optimism. This month 22% regard the situation as weak, while 21% see it as good.

According to the study, the companies are doing a better job in turning over their merchandise. While 2% in both surveys said that inventory was inadequate, the percentage claiming stocks to be excessive fell from 19% to 13%.

When the data are cross-checked, it is possible to observe that the industries indeed increased their sales: The percentage who indicated a weak level of demand dropped from 34% to 21%, and the percentage who evaluated the period as one of strong demand rose from 9% to 11%.

Other indicators of a growth trend are the forecasts for the next three months: The percentage indicating that they plan to hire more workers rose from 21% to 24%, while the percentage intending to cut their staff decreased from 22% to 16%.

"This is the third best result in the last seven years for decisions on job creation," observed the economist Aloí­sio Campelo, coordinator of the study.

The Ibre survey also indicates caution when it comes to decisions to expand production: 38% responded affirmatively, as against 45% in the previous survey, and the percentage who forecast a reduction rose from 19% to 28%.

Agência Brasil

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