Brazil January Capacity Utilization Rate Jumps to Two-Year High

Brazil’s industrial capacity utilization rose more than expected in January to the most in two years as manufacturers show signs of emerging from a slump.

Capacity usage as measured by the National Industrial Confederation, known as CNI, reached 84 percent in the month, as compared to a 81 percent forecast from nine economists surveyed by Bloomberg. Utilization increased from a revised 82.9 percent in December and 81.4 percent last year.

President Dilma Rousseff has enacted tax breaks for industrial goods and pressured commercial banks to reduce lending rates to revive investment in Latin America’s biggest economy, which last year posted the slowest growth among the BRIC countries of Russia, India and China. The government also cut industrial power rates as much as 32 percent to boost competitiveness. The central bank on March 6 held its benchmark rate at a record low 7.25 percent for a third straight meeting.

“Industry has reduced its idleness,” Flavio Castelo Branco, CNI’s executive manager of economic policy, said in an interview. CNI expanded the number of industries included in the index’s calculation to 21 from 19 previously, he said.

Industrial production rose 2.5 percent in January, more than the 1.6 percent forecast from economists and the highest monthly increase since March 2010, the national statistics institute said March 7. Output of capital goods, a sign of investment, rose 17.3 percent from a year earlier, the first increase after 16 months of decline.

Swap rates on the contract maturing in January 2014 rose one basis point, or 0.01 percentage point, to 7.86 percent at 1:15 p.m. local time. The real weakened 0.2 percent to 1.9615 per U.S. dollar from 1.9569 yesterday.

To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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