Brazilian steel plant In Brazil, industrial activity finally slowed down in June. On the National Industrial Confederation activity index June came in at 51.8, down from 54.9 in May. That is still positive (anything over 50 is), but the fact is that the small business segment came in at 49.1. That indicates a slowdown.

    The CNI survey also found that industry-wide average use of installed capacity fell in June. At 48.5 on the CNI index, it was down from 50.3 in May. And, once again, in the small business segment, it was lower at 46.1 in June, down from 48.4 in May, demonstrating a sharper downturn.

    The most recent survey by the National Industrial Confederation of the industrial sector, at the end of the second quarter, found that expectations are for continued growth, but at a slower pace.

    It should be recalled that Brazil’s GDP grew (“roared” is perhaps a better word) at 9% in the first quarter of 2010.

    Renato da Fonseca, an executive manager at CNI, says that the roar at the beginning of 2010 was due to a government stimulus package. And now that the strong consumer incentives have been removed, there has been a cooling off as demand fell.

    Fonseca points out that the Brazilian economy is also suffering from weak exports and very strong imports at the moment. A moment, he says, that calls for caution over at the Central Bank where they have a knee-jerk reaction to any sign of economic overheating: higher interest rates.

    And, in fact, Brazil’s key interest rate, the Selic, did rise by 0.50 percentage points just last week; this, following two consecutive increases of 0.75 percentage points, which took the Selic from a historical low of 8.75% to where it is now: 10.75% per year – the highest interest rate in the world.

    Fonseca calls for a little more creativity. Something beyond jacking up the Selic, like maybe a combination of fiscal and monetary policy modifications that will at least attempt to preserve some of the optimism in the economic segment.

    “The Central Bank is using the interest rate to control demand, fearing demand will get out of control. But the industrial sector has not had any problems with demand. The problem is that higher interest rates smother investments and without investments it is supply that is in danger.”

    ABr

    Tags:

    • Show Comments (2)

    • wiseman

      To capnamerca
      And further fueling the carry trade, creating a catch 22 situation that could lead to a vicious cycle.

    • capnamerca

      What do they expect?
      High taxes and high interest rates. Both proven killers of economic growth and investment.

    Your email address will not be published. Required fields are marked *

    comment *

    • name *

    • email *

    • website *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Ads

    You May Also Like

    Near the Brazil-Peru border

    Brazil Discovers Uncontacted Indians on Peru Border

    The Brazilian government has discovered signs of some of the world's last uncontacted tribes ...

    Marina Silva

    Third Place Marina Silva Big Winner and King Maker in Brazil’s Presidential Election

    Dilma Rousseff chosen by Brazilian President Luiz Inácio Lula da Silva to succeed him ...

    Indians Out!

    President Fernando Henrique Cardoso and the Indian leadership were supposed to meet, but this ...

    Brazil’s Petrobras World’s Best in Excellence Just Behind Shell

    Brazilian oil company Petrobras ranked second in a world evaluation made by the Management ...

    222 Million: the Official Number of Latin America’s Extremely Poor

    In spite of recent advances Latinamerica still has 222 million people living in extreme ...

    Petrobras prospecting for oil off the coast of Santos, São Paulo, Brazil

    Brazil Strikes Light Oil Off Sí£o Paulo Coast

    It's been one week now that Brazil's government owned oil corporation Petrobras announced the ...

    Would Lula Oust Lula from Brazil?

    The imbroglio about the expulsion of the New York Times reporter from Brazil ended ...

    Brazilian favela

    124 People Hold 12% of Brazil’s Wealth. Half of Population Survives on US$ 4 a Day

    Brazil’s 124 richest people hold assets totaling 544 billion reais equivalent to 238.6 billion ...

    Brazil vs. NYT: The Autopsy of a Hangover

    It became obvious that Brazil’s Luiz Inácio Lula da Silva, the charismatic labor leader ...

    Economy Must Produce Well Being, Says Brazil’s Lula in Paris

    President Luiz Inácio Lula da Silva declared that he would like to see the ...