Brazil: January data on industry and investment consistent with gradual and spreading recovery - Rabobank

According to analysts from Rabobank, the January Industrial Production data from Brazil, is consistent with a gradual and spreading activity recovery. They look for a GDP growth of 2.2% in 2018 (consensus: 2.9%), admitting a slight upward bias.

Key Quotes: 

“Industrial production ex-construction (IP) fell 2.4% m/m in January, a slightly steeper decline than economists were looking for (-2.1%). Trend industrial activity remains strong though, moving at a sequential annualized speed north of 5% for the last six months.”

“IP details for the month show a widespread decline across categories and sub-sectors. But numbers from a larger time window signal faster and broader improvement.”

“ Our high frequency proxies for capital goods absorption and aggregate investment spending also point to a weak January. While we remain sceptical (or less sanguine than the market) about the speed of recovery in gross fixed capital formation in 2018, the trend figures continue herald a solid pickup.”

“In our view, the January data on industry and investment are consistent with a gradual and spreading recovery. Yet we believe the bar is high (i.e. in terms of sequential growth) to guarantee a GDP growth rate near 3% this year (the consensus view).”

“We remain on the less bullish camp for GDP projections this year, as we still believe pending electoral uncertainties and residual recession hangovers will make a bit of headwinds to an overall favourable environment. We look for GDP growth of 2.2% in 2018, admitting a slight upward bias.”