Itaú BBA - Industrial production falls 0.1% in March, disappointing expectations

Macro Brazil

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Industrial production falls 0.1% in March, disappointing expectations

mayo 3, 2018

Weakness was widespread, with declines in 14 out of 24 activities

Industrial production fell 0.1% mom/sa in March, missing the median of market expectations (0,5%) and our forecast (0.8%).

Weakness was widespread, with declines in 14 out of 24 activities, reinforcing the downside to our forecast for GDP growth in 2018 (currently at 3.0%).

Our preliminary estimate for April is an increase of 0.5% mom/sa.

Widespread weakness, with declines in 14 out of 24 activities 

Industrial production dropped 0.1% mom/sa  in March, below the median of market expectations (0.5%) and our call (0.8%). Compared to March 2017, industrial output went up 1.3%, decelerating from 2.4% in the previous month. 

The gross reading for February was revised downward by 0.4 p.p., worsening the negative impact on forecasts for the 1Q18 GDP report. 

The breakdown analysis outlines a mixed picture. Among economic categories, there were seasonally-adjusted monthly gains in the production of durable consumer goods (1.0%), capital goods (2.1%), and other consumer goods (0.2%). Production of intermediate goods dropped 0.7% mom/sa.

In terms of economic activity, extraction and mining advanced 3.9% mom/sa, offsetting some of the drop seen in the previous month. Manufacturing output rose 0.2% mom/sa. A more detailed breakdown shows declines in 14 out of 24 activities, suggesting that the weakness was not caused by just a few segments.

Coincident indicators signal growth in April

Available coincident indicators (industrial confidence, capacity utilization, weekly foreign trade figures, power consumption, auto sector data, among others) point to a 0.5% mom/sa increase in industrial production in April (8.6% yoy, with a boost from the higher number of working days vs. April 2017).

Heat map: Cooling down

Our heat map shows seven economic activities cooling down and two heating up. Among the more aggregated components, not much has changed, apart from a modest warm up in extraction and mining and capital goods.

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

Artur Manoel Passos



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