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braz2SAO PAULO: Brazilian industrial output shrank in November due to a slowdown in automobile production, suggesting that a mild recovery in the manufacturing sector remains vulnerable.


Output from Brazilian factories and mines contracted 1 percent in November from a year earlier, government statistics agency IBGE said on Friday, falling below the 0.8 percent decline forecast in a Reuters survey.


The data follows a 2.5 percent year-over-year rise in October, revised up from a previously-reported 2.3 percent on Friday.


October's figures showed industry posting its first annual increase in more than a year and helped make the case that Brazil's manufacturers were beginning to emerge from more than two years of weak growth.


President Dilma Rousseff's government has attempted to boost the sector through a series of stimulus measures, trade barriers and tax breaks, although November's figures suggest a muted positive impact on Brazil's manufacturers.


Unemployment in Brazil was close to an all-time low in November while real wages increased, piling additional cost pressure on manufacturers already struggling with low productivity, high taxes, and infrastructure bottlenecks.


The biggest contributor to November's backtrack in industrial output compared with the previous year was a fall in automobile production, which makes up more than one-fifth of Brazil's manufacturing output, IBGE said.


Car production fell 5.3 percent in November from October, as tighter credit and cooling demand overwhelmed the government's efforts to boost the sector.


Despite November's decline, a private report on Wednesday suggested Brazil's manufacturing sector is still recovering, albeit at a slower pace.


The HSBC Purchasing Managers' Index for the Brazilian manufacturing sector fell to a seasonally-adjusted 51.1 in December, from 52.2 in November, yet remained above the 50 mark that divides expansion from contraction for the third straight month.


November's industrial production contracted 0.6 percent from October, less than the 0.9 percent drop forecast in the survey. Estimates for the monthly drop ranged from 0.3 percent to 1.1 percent.


Growth in industrial production from October to September was revised to 0.1 percent on Friday, down from a previously reported 0.9 percent.


Of the 27 industrial sectors surveyed by IBGE, 16 contracted in November from October, including mining, oil and gas drilling and automobile production.


In broader industrial categories, output of capital goods, which were most heavily hit during the economic slowdown, shrank 1.1 percent for the month, the IBGE said. Production of durable consumer goods and intermediate goods both fell 1 percent from October.


Center>Copyright Reuters, 2013


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