The industry’s poor performance and hope in consumption

BRAZIL ECONOMICS - Report 16 Sep 2019 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The outlook for GDP growth is disheartening. Despite the surprisingly good performance of industrial GDP in the second quarter, when it grew by 0.7% in relation to the first quarter, there are no signs that this was trend change. The monthly survey of industrial production conducted by the IBGE shows that from May to July, gross output declined by 1.2%, leaving a negative carry-over to the third quarter, and there is strong evidence that the manufacturing segment is more sensitive to external shocks than overall GDP, due to the negative consequences of decelerating world growth (also most accentuated in industry). In summary, the Brazilian economy cannot count on recovery of industry to favor faster growth, which mainly depends on the reaction of household consumption.

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