Brazil’s industrial production drops in February; 11 out of 24 sectors down

Thursday, April 2nd 2015 - 08:20 UTC

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A drop in commodities prices and greater fiscal tightening is weighing on Brazil’s economy, which many analysts expect to fall into recession this year

Brazil's industrial production dropped in February after a momentary uptick at the beginning of the year, as factories and mines braced for what economists say could be the country's worst year in more than two decades.

Industry output declined 0.9% in February from the previous month in seasonally adjusted terms, the Brazilian Institute of Geography and Statistics, or IBGE, said Wednesday.

The IBGE also revised down its figure for January, saying industrial production rose just 0.3% rather than the 2% initially calculated.

Economists surveyed weekly by Brazil's central bank again cut their forecast for 2015 economic growth this week, saying they expect gross domestic product to contract 1%. That would be Brazil's worst pace of growth since 1990, according to data from Ipea, a government economics institution.

A drop in commodities prices and greater fiscal tightening is weighing on the nation's economy, which many analysts expect to fall into recession this year. Hard-to-fix structural problems, such as low productivity, poor infrastructure at home and high tax and labor costs are widely cited as further barriers to growth among local manufacturers: the so called ‘Brazil cost’.

Production dropped in 11 of 24 industrial segments on a monthly basis, with automobile manufacturing contributing the most to the decline.

Durable goods retreated 0.4% from January and 25.8% from February 2014 as heavier household debt loads and higher interest rates sapped demand for big-ticket items.

Production retreated 9.1% in February from a year earlier.