Brazil: Industrial production headed for growth in Q3 – Rabobank

Brazil’s industrial production (IP) fell 0.8% m-o-m in August, shy of consensus (0.0%) and it was the first drop in five months, probably meaning a “technical” adjustment to recent output gains, explains Mauricio Oreng, Senior Brazil Strategist at Rabobank.

Key Quotes

“The 3-month annualized pace of expansion is now at a hefty 6.5%, whereas the (even less volatile) 6-month clip remains at a respectable 3.3%.  All IP categories are showing strong sequential growth on a trend basis.”

“The IP carry-over for Q3 now stands at 0.7% (2.8% annualized), meaning a good growth in the makings for this quarter.”

“The improving absorption of capital goods and recovery in construction inputs are good omen for investment. Private capital spending looks headed for a growth in Q3, yet electoral uncertainties may well put a lid on the speed of recovery next year.”

“All in all, the data remains consistent with a gradual activity recovery for 2017-2018.”