To: Cogito Ergo Sum who wrote (48071 ) 4/2/2009 2:40:22 AM From: elmatador Read Replies (1) | Respond to of 219433 Brazil February Industrial Output Weak, But Worst May Be Over industrial output in February was below expectations but the figures left many economists saying the only way now is up. Brazil February Industrial Output Weak, But Worst May Be Over By John Kolodziejski Of DOW JONES NEWSWIRES RIO DE JANEIRO (Dow Jones)--Brazil's industrial output in February was below expectations but the figures left many economists saying the only way now is up. Industrial production rose 1.8% in February from January, the Brazilian Census Bureau, or IBGE, said Wednesday, a figure below the 2.2% median rise forecast by 10 analysts consulted by Dow Jones Newswires. Worse still was the 17% decline in production from a year earlier, which was steeper than the 14% falloff predicted by the analysts. But the data may also show the worst of the crisis for the sector may be over, said Jankiel Santos, an economist at Sao Paulo's BES Investimento fund. Santos pointed to February being the second month in a row of output growth as well as output rises spreading into intermediate and non-durable goods. January's growth was concentrated in durable goods, led by Brazil's beefy auto sector. Auto makers axed output in November and December, but boosted production in January and February, aided by steep discounts and tax breaks. Brazil's auto output jumped 9.2% in February, compared with January, according to the country's vehicle-makers association, Anfavea. Higher auto sales have sharply reduced inventories and should provide a further boost to output in coming months, Santos noted. IBGE's coordinator for industrial data, Silvio Sales, also saw grounds for optimism. "Considering the record negative in December and the recovery in January and February, we may now say that industry has begun to emerge from the bottom of the well," he said. But not everyone is upbeat. Goldman Sachs' Senior Economist Luis Cezario said the rise in output in January and February was "merely a technical rebound, boosted by the end of the inventory liquidation in the vehicle and intermediate goods sectors." Cezario said a sharp contraction in business investment and exports of manufactured products will continue to reduce demand for Brazil's industrial goods. However, he noted that industrial production could increase in the second quarter in some categories as inventory liquidation is completed. The optimists have an ally in the Industrial Confidence Index, or ICI, compiled by the Getulio Vargas economic foundation. Industrial output closely shadows the ICI. The ICI polls businesses nationwide and then compiles their responses into an index that ranges from zero points to 200. A score of 100 shows "neutral" business confidence, with below 100 "pessimistic" and above 100 "optimistic." The March ICI was 77.9 points, but it was an improvement from the 76.2-point ICI of February. Aloisio Campelo, who coordinates the ICI data, told the Estado newspaper on Wednesday that December was "the low point" for Brazil's business confidence, with subsequent months showing a slow but steady improvement. However, Campelo added that the industrial recovery is fragile, with 25.2% of companies consulted in March saying they planned job cuts in the next three months. That figure, nevertheless, was better than the 29.7% who cited job cuts in February and 32.5% in December. "The situation has stopped getting worse. We've come from a really bad situation to a situation that is simply not very favorable to employment," Campelo said. Looking ahead, Brazil's central bank will likely cut its Selic base rate by 150 basis points in April to 9.75% to help foster a recovery, according to Sao Paulo's Gradient Investimentos fund. Santos of BES also believes the weak February data will lead to a 150 basis point cut. Goldman Sachs sees the Selic rate dropping to 8.5% by July. -By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; John.Kolodziejski@dowjones.com