Brazilian industry is struggling, and high interest rates are hindering growth.

Brazilian manufacturing output in January continued its downward trend after three consecutive months of decline, as the Brazilian industry struggled due to high interest rates.

Industrial production in Brazil remained unchanged in January compared to December, according to a report released on March 11 by the IBGE statistics agency. This result was lower than market forecasts and reflects a slowdown in the local economy . It follows three consecutive months of declines, as the industry struggles due to high interest rates, although the overall economy remains strong in 2024.

Brazilian industrial production in January increased by 1.4% compared to the same period last year, but this was lower than the 2.3% increase that the market had expected. (Illustrative image)

Economists had previously forecast that Brazilian industrial production in January would increase by 0.5% compared to December, while in reality there was no change.

Production increased in three of the four major sectors surveyed by IBGE, with capital goods (physical assets used to produce other goods and services) recovering after two months of decline. However, the decline in intermediate goods production dragged the overall index down.

Compared to the same period last year, Brazil's industrial production in January increased by 1.4%, but this was lower than the 2.3% increase that the market had expected.

" This is not a very favorable start to the year ," said Andres Abadia from the macroeconomic research and consulting firm Pantheon Macroeconomics. " The slowdown in Brazilian industry could continue into the first quarter, as high interest rates, weak demand and slowing global growth impact economic activity ."

Brazil's benchmark interest rate is currently 13.25%, and the central bank plans to raise it by another 100 basis points at its meeting later this month to control rising inflation.

Nevertheless, Brazilian market policymakers are still monitoring signs of a slowdown but believe it is too early to determine a clear downward trend.

Brazil's benchmark interest rate is currently 13.25%, and the central bank plans to raise it by another 100 basis points at its meeting later this month to control rising inflation.

ThanhThanh

Reuters