Brazil's industrial production unchanged in August, surprising economists, who had expected rise of 0.2%; year-over-year, production falls 1.2%, more than the 0.6% contraction that had been predicted

October 2, 2013 () – Brazil’s industrial production unexpectedly stalled in August, as factories reduced the output of consumer goods.

Industrial output was unchanged in August after tumbling a revised 2.4 percent in July, the national statistics agency said today in Rio de Janeiro. That compares with the median 0.2 percent rise estimate from 34 economists surveyed by Bloomberg. Production fell 1.2 percent from the year before, a greater drop than the 0.6 percent contraction predicted by economists, and down from a revised 1.7 percent jump in July.

President Dilma Rousseff has sought to reactivate the nation’s manufacturing sector with tax breaks for producers and consumers. With government revenue flagging and growth showing signs of improvement, Rousseff has begun rolling back some of those incentives. New investments in production will face borrowing costs that policy makers have boosted this year by more than any major economy in order to tamp inflation.

Swap rates on the contract maturing in January 2015 fell one basis point, or 0.01 percentage point, to 10.30 percent at 9:13 a.m. local time. The real strengthened 0.1 percent to 2.2139 per U.S. dollar.

Industrial production rose in 15 of the 27 sectors monitored in August. Consumer goods output fell 0.6 percent.

Inflation Forecast

Economists in the central bank’s most recent weekly survey raised their 2013 inflation forecast to 5.82 percent and held their growth forecast at 2.4 percent. The economists foresee the exchange rate at 2.3 reais per dollar at year-end.

Brazil’s central bank has raised its benchmark Selic rate in four straight meetings, to 9 percent, up from a record-low 7.25 percent in April. Inflation decelerated to 5.93 percent in the year through mid-September. While that’s the first time all year it has fallen below 6 percent, it remains closer to the ceiling than the center of the bank’s target range. Policy makers target 4.5 percent plus or minus two percentage points.

Mercedes-Benz, the world’s third largest luxury carmaker, announced yesterday it will spend 170 million euros ($230 million) for a new factory in Brazil. The news followed an announcement by competitor Audi AG last month it will invest 500 million reais in Brazil through 2016. Bayerische Motoren Werke AG also plans to invest 200 million euros in a new plant.

Brazil’s use of manufacturing capacity in July fell to 82.2 percent, its lowest level since September 2012, according to the National Industry Confederation. Industrial confidence in August and September rebounded from a four-year low in July.

--With assistance from Dominic carey in Sao Paulo. Editor: Harry Maurer

To contact the reporter on this story: David Biller in Rio de Janeiro at

To contact the editor responsible for this story: Andre Soliani at

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