Slow Recovery of Industrial Production and Investments

BRAZIL ECONOMICS - Report 06 Nov 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The data for September confirm that industrial output is still recovering, but at a slow pace. Although production of capital goods dipped after having expanded for five straight months, the growth of capital goods imports will lead to an increase in gross fixed capital formation. All the same, we maintain our outlook for very sluggish growth of fixed capital investments, due to: (i) the political and fiscal risks; (ii) the high levels of idle capacity and corporate indebtedness; and (iii) the analysis contained in the last Financial Stability Report from the Central Bank, confirming the high volume of distressed business loans, indicating this segment of the credit channel remains obstructed.

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