May 3, 2017 / 1:05 PM / a year ago

UPDATE 1-Brazil's industry shrinks at fastest pace in 7 months in March

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    BRASILIA, May 3 (Reuters) - Industrial output in Brazil
shrank at the steepest rate in seven months in March, a
bigger-than-expected decline highlighting uncertainty about a
long-awaited economic recovery despite a string of interest rate
    Industrial production fell 1.8 percent from February
, government statistics agency IBGE said on Wednesday.
The median forecast of economists in a Reuters poll predicted a
decline of 1.0 percent.
    Industrial output has returned to 2009 levels as the country
plunged into its deepest recession ever, driving up unemployment
and adding to discontent ahead of next year's wide-open
presidential election.
    Output fell in 15 out of the 24 industrial sectors surveyed
by IBGE, including automakers, pharmaceutical companies and oil
refineries. Food processing rebounded from a drop in February.
    The IBGE report contrasts with a purchasing managers' survey
showing the industrial sector saw new orders rise in March for
the first time in more than two years, followed by expanding
activity in April for the first time since 2015.
    Adding to previous signs of growth, business confidence has
climbed to a three-year high, according to a private survey last
week, suggesting the worst seemed to be over for manufacturers.
    Brazil's central bank slashed interest rates from 14.25
percent last year to 11.25 percent last month and is expected to
keep cutting to 8.5 percent by December as inflation subsides
and the economy's recovery appears fragile.
    Economists forecast Brazil's industrial output to grow 1.5
percent and gross domestic product to expand 0.5 percent in
2017, according to a weekly central bank survey. Brazil's GDP
fell more than 3 percent in each of the past two years.       
    Production in March rose 1.1 percent from a year earlier,
short of expectations for an increase of 2.1 percent.
 (Percent change)                      m/m              y/y
 Capital goods                        -2.5              4.5
 Intermediate goods                   -2.5              0.5
 Consumer goods                       -2.7              1.3
     Durable consumer goods           -8.5              8.5
     Semi-durable and                 -1.8             -0.5
 non-durable consumer goods                 
 Industrial output                    -1.8              1.1
 (Reporting by Silvio Cascione; Editing by Frances Kerry)
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