Nov. 4 (Bloomberg) -- Brazil's industrial production rose more than forecast in September, a month before the global credit crisis hit Latin America's biggest economy.

Output rose 9.8 percent from a year ago, more than the 8.6 percent median forecast in a Bloomberg survey of 28 economists. Growth in August was a revised 1.9 percent. After stripping out seasonal factors, output rose 1.7 percent from August, the national statistics agency said in Rio de Janeiro today.

The economy ``probably reached its peak in September, before the credit crunch,'' said Alexandre Lintz, chief strategist in Brazil with BNP Paribas. ``The October figure will reveal a drop because of the financial turmoil.''

Brazil's government is trying to sustain economic growth as investors pull money out of the country, driving down stock prices and weakening the currency. Companies are slashing output and investment in anticipation that the economy may grow next year at around half of this year's estimated pace of 5.2 percent.

Fiat SpA, the country's largest automaker, cut its sales- growth forecast for next year to 20 percent from 30 percent, as the cost of car loans jumps. Together with General Motors Corp., Fiat gave thousands of workers early vacation last month because of the slowdown.

Outlook

Brazilian President Luiz Inacio Lula da Silva, a former lathe worker, has promised to help ``key industries,'' such as automobiles and construction, weather the crisis. Already, the government has provided banks with incentives to lend up to 10 billion reais in working capital to homebuilders, many of whose projects could be left unfinished by the crisis.

About 57 percent of 658 companies in the industrial state of Sao Paulo plan to cut investments next year as the credit freeze worsens, according to a survey by the country's main industry group.

Manufactures operated at 83.3 percent capacity in September, close to July's record 83.4 percent, the National Industrial Confederation said today in Brasilia.

Industrial sales, stripping out seasonal factors, rose 2 percent in September from August and 8 percent in the nine first months of the year. Wages gained 3 percent in September from August, the biggest increase since the confederation began keeping records in 2006, the report showed.

``The effects of the financial crisis began hurting credit and the currency but didn't impact the real economy in September yet,'' Flavio Castelo Branco, the confederation's chief economist said at a news conference today in Brasilia.

Economists covering Brazil lowered their forecast for economic growth next year for the third straight week, to 3 percent, in the central bank's weekly survey published yesterday.

The real rose for the first day in three, strengthening 2 percent to 2.1360 per dollar at 9:26 a.m. New York time, from 2.1795 late yesterday.

To contact the reporter on this story: Joshua Goodman in Rio de Janeiro jgoodman19@bloomberg.netKatia Cortes in Brasilia at at kcortes@bloomberg.net

Last Updated: November 4, 2008 10:00 EST