Brazil's industrial output fell for a fourth straight month in September as automakers, metal producers and other manufacturers were hit by a worsening recession, government data showed on Wednesday. This follows the Brazilian central bank's announcement on Tuesday that the economy in 2015 would shrink over 3% with inflation almost at 10%.
The IBGE stats agency reported that industrial production fell a seasonally adjusted 1.3% in September from August. Production in September slid 10.9% from a year earlier, the steepest decline since April 2009. Brazil's industrial output has been shrinking from a year earlier since March 2014.
Brazil's economy plunged into recession this year as inflation and public sector debt soared, prompting tax and interest rate increases that have weighed on business sentiment.
In September, output dropped in 15 of 24 industrial segments on a monthly basis, with a fall in automobiles and machinery weighing most heavily on the industrial output decline. Higher production of coal coke, oil derivatives and bio-fuels helped limit the decline in the industrial production index, IBGE said.
Industrial production may have declined again in October, according to a purchasing managers' survey on Tuesday. The PMI index for the Brazilian manufacturing sector fell to a seasonally adjusted 44.1 in October, the lowest since March 2009, from 47.0 in September.
On Tuesday Brazil’s Central Bank reported that inflation in 2015 will reach 9.91% and that the economy will shrink by 3.05%. The latest forecasts included in the Focus Bulletin, were slightly more pessimistic than those of last week, when a fall in GDP of 3.02% and inflation of 9.85% were anticipated.
Brazil is currently beset by an economic crisis as well as a huge political controversy that is threatening President Dilma Rousseff’s future as opposition parties are stepping up a campaign to seek her impeachment.
Despite implementing a series of public spending cuts, Rousseff has so far not been able to stop the economic slump that is strangling government revenues and has made what was once a projected surplus for 2015 a deficit.
This latest is news will continued to put pressure on Rousseff’s Finance Minister Joaquim Levy, who she appointed at the back end of last year in an attempt to breathe life back into Brazil’s faltering economy.
Levy is an uncomfortable fit in the populist government. He is an orthodox, University of Chicago-trained economist and a fiscal hawk with an affinity for cutting spending. Ten months after taking on his mammoth task, Levy is dogged by speculation over his departure amid vocal opposition from the ruling Workers’ Party (PT).
However, according to sources in the government and party, both Levy and Rousseff have told officials and lawmakers he is staying to see an unpopular fiscal austerity plan get through Congress.
After that, he may be gone, either because he is pushed out or leaves on his own volition, they say. But the mission he was hired for by Rousseff will be at least partially fulfilled.
“It will be too costly for Levy to leave now,” said a senior PT lawmaker who has spoken with Levy and Rousseff about the minister’s situation. “He will try to pass most of the package and very likely leave after that next year. He is very frustrated and under a lot of pressure.”