Brazil: Industrial activity and aggregate investment soften in Q1 - Rabobank

Analysts at Rabobank note that the Brazilian industrial production (IP) edged down by 0.1% m/m (+1.3% y/y) in March, disappointing expectations as economists looked for a gain of 0.5% m/m (+3.0% y/y).

Key Quotes

“This number follows a downwardly revised reading of 0.1% m/m and 2.4% y/y in February (from 0.2% m/m, 2.8% y/y previously), confirming that the Brazilian industry started the year on the back foot.”

“The details look better than the headline, as the recent weakness seems concentrated on intermediate goods. Other IP categories continue to post good growth in key comparisons. Diffusion indexes and heat maps still show constructive indications beneath the headline.”

“Aggregate investment has slowed in 18Q1, yet it still looks poised for further improvement across the year. Our high frequency investment proxy fell by nearly 5% sequentially in annualized terms in the first quarter, following a 17% jump in 17Q4.”

“Overall, we believe the slowing activity data in Q1 should not be over read in either directions. Yet we see the data as consistent with the more gradual recovery that we envision ahead, as we project a GDP growth of 2.2% in 2018 (consensus: 2.75%).”