BRASILIA (Reuters) – Industrial production in Brazil rose in March, but ended the first quarter with a negative print, highlighting the challenges for the sector amid problems in global chains and a domestic scenario marked by high interest rates and inflation.
Industrial output grew 0.3% in March from February, government statistics agency IBGE said on Tuesday, slightly above the 0.2% increase projected in a Reuters poll of economists.
Still, it stood 2.1% below the level in February 2020, before the onset of the pandemic, the agency said.
Production in March retreated 2.1% from a year earlier, better than the 3% drop estimated in the poll. But in the first quarter of the year, it fell 4.5% compared to the same period in 2021, according to IBGE.
Andre Macedo, the agency’s research manager, said factors that make it difficult for industry to resume remain, such as increased production costs amid the scarcity of some raw materials.
“Furthermore, inflation has been lowering disposable income and interest rates are rising and making credit more expensive,” he said.
Brazil’s central bank is leading one of the most aggressive cycles of monetary tightening in the world to tame double-digit inflation, and is expected to raise rates again this week.
In March, there was an increase in industrial production in three of the four major economic categories, especially capital goods, with growth of more than 8% over February.
On the other hand, output for semi- and non-durable consumer goods fell by 3.3%, snapping a three-month expansion.
The industrial sector has yet to show a robust performance despite the government’s sharp reduction of an industrial tax, a move that now faces mounting legal challenges.