Brazil’s industrial production in January fell the most in more than three years, reinforcing bets that the central bank will accelerate the pace of interest-rate cuts today to shore up economic growth.
Output fell 2.1 percent from the previous month, more than twice the median estimate of a 0.8 percent decline from 45 analysts surveyed by Bloomberg. From the year earlier, production fell 3.4 percent, the national statistics agency said in Rio de Janeiro today.
The 6 percent increase in the real against the dollar this year has made imports cheaper and exports more expensive, undermining the international competitiveness of Brazilian manufacturers. Interest rate future contracts maturing in January 2013 fell for the sixth day out of the past seven as more investors bet the central bank will cut rates by 75 basis points today.
“The sectors that compete with imported goods have suffered more,” Jankiel Santos, chief economist at Espirito Santo Investment Bank, said by telephone from Sao Paulo. “The result should reinforce the central bank’s view that there is room to cut rates.”
President Dilma Rousseff’s administration is using stimulus measures including interest rate cuts, tax reductions and looser bank lending requirements to boost growth.
Traders are split on whether the central bank will cut the benchmark interest rate by 50 or 75 basis points today, according to Bloomberg estimates based on interest rate futures. Policy makers have cut the rate by 50 points at each of their last four meetings, pushing it 10.50 percent.
The yield on the interest rate futures contract maturing in January 2013, the most traded in Sao Paulo today, fell nine basis points, or 0.09 percentage point, to 8.92 percent at 10:46 a.m. Brasilia time. The currency declined 0.4 percent to 1.7658 per dollar.
A 31 percent slump in the automotive industry from the previous month led the decline in January industrial output, as carmakers scaled back production to reduce stocks.
Car imports surged 30 percent last year, accounting for 23.6 percent of vehicles licensed, compared with 18.8 percent in 2010.
The situation is “alarming,” the National Industry Confederation said on March 6, after the statistics agency announced gross domestic product figures showing industrial output fell 0.5 percent in the fourth quarter from the previous three months.
Production of durable goods fell 7.6 percent in January from a year earlier, while output of capital goods, a barometer of investment, declined 13 percent, the statistics agency said today.
The Brazilian economy grew by 0.3 percent in the fourth quarter after a 0.1 percent contraction in the third quarter.
Economists maintained their estimate for 2012 growth at 3.3 percent in a March 2 central bank survey.