December 2, 2016 / 11:37 AM / 2 years ago

UPDATE 2-Brazil's weakening industry suggests no immediate recovery

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    By Silvio Cascione
    BRASILIA, Dec 2 (Reuters) - Industrial output in Brazil fell
more than expected in October as capital goods production
slipped for a fourth straight month, in a sign of weakened
appetite for investment amid a recession, government data showed
on Friday.
    Total industrial production fell 1.1 percent in October from
September after seasonal adjustments, erasing the 0.5
percent increase seen in the previous month, government
statistics agency IBGE said. 
    The October industrial contraction suggests Brazil's economy
continued to slip further into recession in the beginning of
fourth quarter, raising concerns that the country's worst
downturn in at least eight decades could stretch into 2017.
    "This was one of the first data points about the fourth
quarter and it was not encouraging," wrote José Francisco
Gonçalves, chief economist of Banco Fator, in a research note.
    Economists in a Reuters poll forecast a decline of 0.8
percent, according to the median of 20 estimates.
    Production in October retreated 7.3 percent from a year
earlier, down from a 4.8 percent drop in September.
    Output fell in 20 of the 24 industrial activities covered by
the IBGE survey, including automobiles and food processing.
Capital goods production fell 2.2 percent.
    A purchasing managers' survey on Thursday showed no signs of
an industrial rebound in November as the sharp currency drop
that followed the election of Donald Trump to the White House
raised costs for manufacturers. 
    Brazil's economy is expected to shrink more than 3 percent
for a second straight year in 2016, leaving more than 12 million
unemployed. Banks and government officials have cut their
forecasts for economic growth in 2017 to around 1 percent.
 (Percent change)                      m-m              y-y
 Capital goods                        -2.2             -9.8
 Intermediate goods                   -1.9             -7.0
 Consumer goods                       -0.4             -7.3
     Durable consumer goods           -1.2             -6.8
     Semi-durable and                 -0.8             -7.5
 non-durable consumer goods                 
 Industrial output                    -1.1             -7.3
 (Reporting by Silvio Cascione; Editing by Alison Williams)
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