Brazil's industrial output undershoots forecasts, remains steady in January

SAO PAULO (Reuters) - Industrial production in Brazil remained unchanged in January from December, government statistics agency IBGE said on Tuesday, undershooting market forecasts as indicators continue to sign a slowdown in the local economy.

The January figure follows three consecutive months of negative readings as Brazil's industry grapples with high interest rates, with the sector having lost steam in recent months despite an overall strong 2024.

Economists polled by Reuters expected a 0.5% month-on-month expansion in January.

Production rose in three of the four main categories surveyed by IBGE, with capital goods standing out after drops in the previous two months, but a fall in intermediate goods output weighed on the overall index.

Industrial production in January grew 1.4% on a yearly basis. But markets expected a 2.3% expansion, according to the Reuters poll.

"This was a poor start to the year," said Andres Abadia of Pantheon Macroeconomics. "The industrial slowdown is likely to continue in Q1, as stiflingly high interest rates, weakening demand and less supportive global growth weigh on activity."

Brazil's benchmark interest rate currently stands at 13.25% and the central bank has already penciled in an additional hike of 100 basis points for its meeting later this month as it seeks to tame rising inflation.

Policymakers have closely watched moderation signs but noted that it was still too early to establish a clear slowdown trend.

(Reporting by Gabriel Araujo; Editing by Mark Porter)