SAO PAULO (Reuters) – Brazil’s industrial production unexpectedly fell in February from the previous month, official data showed on Wednesday, marking the fifth consecutive month without a positive reading as policymakers watch for signs of economic slowdown.
Industrial output in Latin America’s largest economy slipped 0.1% in February from January, government statistics agency IBGE said, while economists polled by Reuters expected 0.4% growth.
Brazil’s industry has been grappling with high interest rates as the country’s central bank drives an aggressive monetary tightening cycle in an effort to cool the economy and bring inflation back to its target.
The sector has lost steam in recent months despite an overall strong 2024, with IBGE noting in a report on Wednesday that it has declined 1.3% over the last five months, erasing the 1.0% growth it had recorded in August and September.
IBGE attributed the negative results to lower confidence levels among families and the business community, high borrowing costs, elevated inflation, and the depreciation of Brazil’s real currency in late 2024, which pressured production costs.
Output decreased in two of the four main categories surveyed by the statistics agency, with production of durable goods posing the main drag with a drop of 3.2% on a sequential basis.
Industrial production in February grew 1.5% from a year earlier, but economists in the Reuters poll expected a 2.1% increase.
“Overall, the data reinforces the scenario of accommodating domestic demand, especially household consumption, with high interest rates and high inflation likely weighing on consumption decisions,” said Flavio Serrano, chief economist at Banco BMG.
“Looking ahead, we expect the cooling process to continue and intensify in the second half of the year.”
Brazil’s central bank last month raised interest rates by 100 basis points for the third consecutive time to 14.25%, sticking to previous guidance, and penciled in a smaller hike in May.
(Reporting by Gabriel Araujo; Editing by Paul Simao)
Comments