Industrial Production and Weakening of the Real

BRAZIL ECONOMICS - Report 08 Sep 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The steep drop of industrial output in July (Graph 1) threw another bucket of cold water on the estimate of GDP for the third quarter, which will almost certainly show further contraction. On the demand side, neither household consumption nor gross fixed capital formation changes this scenario. The only force that can boost production, albeit not on the immediate horizon, is net exports. The hope in this respect is the depreciation of the exchange rate, which has already been substantial and should continue due to the political crisis and disastrous fiscal policy.

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