Brazil’s industrial production likely fell again in January

Brazil's industrial production in Q4 had dropped 11.8% y/y in Q4 2015. The rate of contraction has speeded in each of the past five quarters. Hence, in 2015, the industrial output had contracted 8.2%, as compared with the contraction of 2.9% recorded in 2014 and growth of 2.2% recorded in 2013.

Industrial output in January 2016 is expected to have contracted 12.3% y/y and 0.9% m/m. The contraction pace is likely to stabilise at about current levels, but it remains consistent and severe with almost 4% contraction of the overall GDP.

There is a hope for rebound at the current stage given the recent business confidence, trajectory and overall demand conditions. However, the downside risk remains due to the acceleration in the pace of decline in domestic demand. Also outlook for external demand have not rebounded in spite of the sharp depreciation of the Brazilian real.

Under such situation it is doubtful whether the rebound in competitiveness because of real's decline alone will be enough to stimulate trade prospects, especially if the global growth outlook seems to have further declined.