Brazil: Industrial production will rebound in October

Florencia Vazquez,Gustavo Arruda,Marcelo Carvalho,Nader Nazmi - Market Economics
Daily Latam Spotlight | 04 Dec 2012 06:00 |

Brazil: Industrial production will rebound in October

BRAZIL

Today, industrial production (IP) will rebound, according to coincident data, including energy consumption, car output, heavy vehicle traffic on toll roads and paperboard sales. A month earlier, an unusually few number of working days led to a soft IP number in seasonally adjusted terms.

We believe industrial production will recover in the next couple of quarters. However, industrials may prove softer in the short term than other sectors.

Yesterday, consensus started to incorporate the weaker-than-expected Q3 GDP growth. The economy grew only 0.6% q/q in Q3 (seasonally adjusted, not annualized), which was much weaker than the widespread expectations for a 1.2% reading that the central bank’s monthly real GDP proxy had indicated before. In addition, growth in Q2 was revised down to 0.2% from 0.4% previously. In all, growth is improving, but much more slowly than previously thought. We are also revising our numbers, which will be published in this week’s Macro Maters.

Consensus revised down growth in 2012 and 2013. This week, the 2012 consensus expectation moved down to 1.27% from 1.50% last week. For 2013, consensus now anticipates growth at 3.7% from 3.94% a week earlier.

As for inflation, consensus remained unchanged for 2012 (at 5.43%) and 2013 (at 5.40%). While consensus expects almost flat inflation of 5.40% in 2013, our greatly out-of-consensus forecast shows inflation breaching the 6.5% tolerance ceiling. Rising wages, along with an upswing in growth, food price hikes, unanchored expectations and no help from the exchange rate, are conspiring to push inflation up next year.