Brazil June Industrial Output Rises More Than Analysts Forecast

Brazil’s industrial production increased more than economists forecast, as greater output of capital goods helped spur activity in the second-largest emerging market.

Industrial output jumped 1.9 percent in June after dropping a revised 1.8 percent in May, the national statistics agency said today in Rio de Janeiro. The increase was more than predicted by all but one of 36 economists surveyed by Bloomberg, whose median estimate was for a 1.3 percent rise. Production rose 3.1 percent from the year before, up from 1.4 percent in May.

President Dilma Rousseff’s administration has struggled to revive industry, which has contracted in five of the past 12 months, with payroll tax cuts and reduced electricity rates. Brazil’s real this week touched a four-year low against the dollar, which helps exporters while posing challenges for domestic manufacturers that compete with imports. The government will announce today a decision not to renew import tariffs on more than 100 products including steel to help stem inflation, according to an official who asked not to be named because the measure has not yet been made public.

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, rose four basis point, or 0.04 percentage point, to 9.63 percent at 9:36 a.m. local time. The real strengthened 0.1 percent to 2.2734 per U.S. dollar. The currency has declined 9.8 percent this year.

Growth Forecast

Industrial production rose in 22 of the 27 sectors monitored in the month. Capital goods output increased 6.3 percent from the previous month and 18 percent year-on-year.

Economists in the most recent central bank weekly survey held their 2013 growth and inflation forecasts at 2.28 percent and 5.75 percent, respectively. They forecast the real will trade at 2.25 per dollar at year-end, up from the previous week’s estimate of 2.24.

“The currency is at a good level,” Mauro Borges, president of the Brazilian Agency of Industrial Development, told reporters in Brasilia yesterday. “We think it improves industrial competitiveness very much.”

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 has increased its benchmark Selic rate by 125 basis points since April. Inflation decelerated to 6.4 percent in the year through mid-July, back within the central bank’s target range of 4.5 percent plus or minus two percentage points.

To contact the reporter on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net

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

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