Brazil's industrial output rises, snaps five-month slump

RIO DE JANEIRO: Brazilian industrial output rose in July following five straight months of declines though gains were slight as the country's economy continued to drag.

Output at factories and mines rose a seasonally adjusted 0.7 percent in July from June, statistics agency IBGE said on Tuesday. That surpassed expectations of a 0.5 percent increase forecast, according to a Reuters survey of 20 analysts.

Industrial production had fallen 1.4 percent in June from May, partly due to the World Cup soccer tournament. Factories idled production during some game days in the month.

"Two things explain July's growth: The end of holidays in June granted for the World Cup, and a low basis of comparison," said Andre Macedo, an economist with IBGE. "It's too early to talk about a recovery in industry ... it just took a small step up from a low place."

Brazil's economy entered a recession in the first half of the year, primarily due to a contraction in the manufacturing sector despite a string of tax breaks and other government subsidies. As growth cooled, manufacturers have been increasingly affected by competition from abroad while they continued to struggle with high taxes and labor costs at home.

Industrial output is expected to drop 1.7 percent in 2014, which could send unemployment higher, according to many economists.

Finance Minister Guido Mantega sought to play down the grim economic data of late, telling reporters on Tuesday: "The economy is not stuck."

"There were some temporary problems in the first half of the year and in the second half we are heading in the direction of a gradual improvement," he said, citing the industrial production data.

Capital goods production jumped 16.7 percent in July from June, while intermediate goods such as textiles and chemicals retreated 0.3 percent. Durable consumer goods such as furniture and home appliances rose 20.3 percent.

July industrial production was down 3.6 percent from a year earlier, better than the 3.7 percent decline forecast in the Reuters poll.

Purchasing managers' index data released on Monday showed Brazil's manufacturing activity expanded in August as the negative impact of the World Cup continued to wear off.