Itaú BBA - Industrial production expands 0.8% in April

Macro Brazil

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Industrial production expands 0.8% in April

junio 5, 2018

The latest result was boosted by a higher-than-average number of working days for the month

Industrial production climbed 0.8% mom/sa in April, topping the median of market expectations (0.4%) and printing in line with our estimate (0.7%). The year-over-year increase of 8.9% was significantly higher than the March reading (1.2%).

The latest result was boosted by a higher-than-average number of working days for the month.

Our preliminary estimate for May is a drop of 5.0% mom/sa, due to cargo transportation stoppages.

April advance was influenced by higher number of working days

Industrial production expanded 0.8% mom/sa in April, above the median of market expectations (0.4%) and in line with our call (0.7%). The gross reading for March was revised downward by 0.1 p.p.

Compared to April 2017, industrial output soared 8.9%, accelerating from 1.2% in the previous month.

The result was deeply influenced by the dynamic of working days. April had 21 working days in 2018 vs. only 18 in 2017, and 20 between 2014 and 2016.

The breakdown analysis outlines a mixed picture.

There were seasonally-adjusted monthly gains in all four economic categories: durable consumer goods (2.8%), capital goods (1.4%), intermediate goods (1.0%), and other consumer goods (0.5%).

In terms of economic activities, extraction and mining output was flat during the month, while manufacturing rose 0.8%. A more detailed breakdown shows increases in just 12 out of 24 activities, indicating that the advance was not as widespread as the headline reading suggests.

The two components that are more closely related to capital Investments continue to move in opposite directions. While production of capital goods expanded 1.4% during the month (and 4.4% year-to-date), production of construction material fell for a fourth consecutive month in April, by 0.7%.

Coincident indicators signal drop in May, impacted by cargo transportation stoppages

Available coincident indicators (industrial confidence, capacity utilization, weekly foreign trade figures, power consumption, auto sector data, among others) point to a drop of 5.0% mom/sa in industrial production in May (-1.8% yoy).

The forecast reflects the cargo transportation stoppages, which halted supply chains and reduced production starting on May 23.

In our view, a good share of production that did not take place in May will be compensated in the following months.

Heat map: Warming up slightly

Our heat map shows six economic activities heating up and four cooling down. Among the more aggregated components, the situation is more consistent with a warm up, led by extraction and mining and capital goods.


For the full methodology, please refer to: New Industrial Production Heat Map.

Artur Manoel Passos
Alexandre Gomes da Cunha

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