Brazil’s industrial production in Q4 2015 had declined 11.8% q/q. Moreover, the contraction pace has accelerated in each of the last five quarters. Even though the contraction pace accelerated through January, the surge in exports indicate that the industrial production rebounded slightly in February, according to Societe Generale.
“That said, it still implies that IP likely contracted -12.2% yoy in the month (or -1.1% mom on a seasonally-adjusted basis)”, says Societe Generale.
Even if the contraction pace is steadying at the present levels, it remains severe and in line with more than 4% contraction of the overall GDP. At this stage, there is little hope for recovery given the overall demand conditions, business sentiment and recent trajectory, added Societe Generale. Risk possibly continues to be on the downside given the acceleration in the pace of domestic demand contraction.
Furthermore, there is not much confidence that rebounded competitiveness because of BRL depreciation will be enough to sharply recover trade outlook, especially when global growth outlook appear to have worsened further. Hence there is very small possibility of Brazil’s industrial output to return to growth in 2016.
