Brasil: Industrial production increases 0.2% in October and extends gradual rebound

The result was driven by a sharp hike in pharmaceutical production, reversing nearly the entire drop of the previous month.

• Industrial production increased 0.2% in October, in line with the median of market expectations and topping our forecast by 0.1 p.p. The result was driven by a sharp hike in pharmaceutical production (20.3%), which reversed nearly the entire drop of the previous month.

• Indicators related to gross fixed capital formation showed a mixed performance in October, as production of capital goods advanced again (1.1%), but construction material production declined (-1.2%).  

• Our preliminary forecast for November is a 0.5% decline, followed by a recovery in December.

Pharmaceutical production reverses previous month’s slide

Industrial production rose 0.2% mom/sa  in October, in line with the median of market estimates and 0.1 p.p. above our forecast. Compared to October 2016, industrial output climbed 5.3%. The gross reading for September was revised downward, by 0.1 p.p.

The breakdown by economic category showed a mixed picture, with gains in capital goods (1.1%) and semi-durable and non-durable consumer goods (2.0%), and declines in durable consumer goods (-2,0%) and intermediate goods (-0.8%). Importantly, the drop in capital goods was modest compared to the 9.7% increase accumulated between June and September.

In terms of economic activity, extraction and mining expanded 0.3%, while manufacturing output advanced 0.5%. A more detailed breakdown (encompassing 24 activities) reflects a favorable situation, as 63% of activities posted monthly gains.

Pharmaceutical production soared 20.3% during the month (see chart), contributing approximately 0.4 p.p. to the headline result.

Investment-related segments also had a mixed performance. Construction material production fell 1.2% in October, while production of capital goods expanded 1.1%, as mentioned above.

Coincident indicators signal a slight decline in November

Available coincident indicators (industrial confidence, capacity utilization, weekly foreign trade figures, power consumption, auto sector data, among others) point to a 0.5% drop in industrial production in November (3.0% increase yoy).

Our preliminary call for December is the return of the upward trend.

Heat map warms up a bit

The heat map below warmed up somewhat in October. Regarding categories, durable consumer goods advanced to “strong” from “neutral”. Breaking down by segment, three gained momentum while two cooled down. For the full methodology, please refer to our Industrial Production Heat Map.

Artur Manoel Passos

Fuente: ITAU

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