Brazil’s industrial production fell in May more than economists forecast, as the government’s fight against inflation complicates its strategy to revive growth. Swap rates fell.
Industrial output fell 2 percent in May after jumping a revised 1.9 percent in April, the national statistics agency said today in Rio de Janeiro. The fall was greater than every forecast from 29 economists surveyed by Bloomberg, whose median estimate was for a 1.1 percent decline. Production rose 1.4 percent from the year before.
President Dilma Rousseff’s administration has slashed payroll taxes for dozens of industries and cut electricity rates in a bid to boost production. At the same time, the central bank started raising rates in April to tame inflation above the upper range of the target. Amid slower-than-forecast growth, industry confidence in June fell to its third-lowest level since 2009.
Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, fell 10 basis points, or 0.10 percentage point, to 9.80 percent at 9:05 a.m. local time. The real weakened 0.5 percent to 2.2404 per U.S. dollar.
Industry contracted 0.3 percent in the first quarter from the previous three months. That drag on Brazil’s economy caused total gross domestic to grow 0.55 percent, below the 0.9 percent median economist forecast in a Bloomberg survey. Economists surveyed by the central bank reduced their 2013 growth forecast for the seventh straight week to 2.4 percent.
Brazil’s central bank accelerated the pace of interest rate increases in May in a bid to slow inflation that is hurting economic growth. The bank, which has increased its Selic rate by 75 basis points since April, will hold its next monetary policy meeting on July 9-10.
Consumer price inflation accelerated to 6.67 percent in the year through mid-June, exceeding the top range of the central bank’s target of 4.5 percent plus or minus two percentage points.
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