MercoPress. South Atlantic News Agency

Some indicators showing the Brazilian economy is slowing down

TAM CEO Libano Barroso plans savings of 50 million dollars annually in line with “a more modest market” than expected.

Brazil's economy showed new signs of a slowdown on Tuesday as steelmakers slashed their growth forecasts, the country's No. 1 airline scaled down its expansion plans and a new poll showed growing pessimism in the manufacturing sector.

Brazil Steel Institute cut its outlook for steel output this year to 36.3 million tons -- still 10.5% above production levels in 2010 but well below the 39.4 million tons it had previously forecast.

Although Brazil is still posting growth rates far above most of the developed world optimism has begun to fade in several sectors. Some of the darker outlook is due to global problems, but Brazilian consumers and manufacturers are also showing clear signs of fatigue after the credit-fuelled expansion of recent years.

The United Nations' economic body for Latin America, known as ECLAC, on Tuesday became the latest entity to cut its growth forecast for Brazil. It now expects 3.5% growth this year, down from a previous 4% forecast and well short of the 7.5% expansion seen in 2010.

“A yellow warning light is going off,” said Paulo Francini, head of economic research at the FIESP industry group in Sao Paulo. “Industry is losing steam, and that's going to show up in employment too”.

TAM, Brazil's largest airline, said it was reducing its projected fleet at the end of next year to 159 planes rather than 163, as previously expected. CEO Libano Barroso said the move would save 50 million dollars annually in line with “a more modest market” than expected.

Barroso said he still expects 15 to 18% demand growth in 2012 -- superb by most standards, but below the 21% growth seen in Brazil's passenger traffic in 2010.

A slowdown has been welcomed by some economists and government officials who had worried about potential asset bubbles in Latin America's biggest economy. One of the most closely watched sectors -- real estate -- seems to be coming back to earth, as new home sales in Sao Paulo fell 31.3% in the first half of the year compared with a year ago, the Secovi-SP industry group said on Tuesday.

Furthermore Brazil could grow more slowly than any other major Latin American economy in 2012, according to the IMF. That outlook has prompted some local investors to pressure President Dilma Rousseff's government to make tax reforms and other changes that could lead to higher growth, although a political crisis makes major reforms unlikely.

In certain areas of the economy, some are even talking of a contraction in coming months. A new FIESP study showed a darkening outlook for the manufacturing sector, which was a laggard even during the boom years, due to Brazil's high logistic costs and an overvalued exchange rate.

FIESP's INA activity index for July rose 0.3 percent on a seasonally adjusted basis compared with June. Yet the group also released a poll showing confidence among manufacturers slipped to its lowest level since December.

The poll “says there's bad weather ahead,” Francini said, adding the INA could turn negative by the end of the year.

The strong real, and slowing economic growth generally, has led to pressure from some Brazilian sectors for greater protections for critical industries.

“We need to protect our domestically produced steel, we need to defend our jobs and not create jobs for the Chinese,” said Catia Mac Cord, director of marketing and economy for the Brazilian Steel Institute.