Brazil Shows Slight Increase in Industry Confidence

By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Despite the negative news about the Brazilian economy as well as political unrest due to large scale corruption schemes, after five consecutive declines the government news wire announced that the Industry Trust Indicator (Índide de Confiança da Indústria, ICI), measured by the Fundação Getulio Vargas (FGV), increased in July compared to June.

The ranking increased from 68.1 to 69.1 points, which was still the second lowest level of the series. The one percent increase occurs after the falls of 1.6 percent in May and 4.9 percent in June.

The increase was observed in seven of the fourteen major segments included in the research and was determined by the improvement in expectations for the following months. The Expectations Index (IE) increased 3.2 percent, after five consecutive falls, when it accumulated loss of 23.6 percent. The index of 67.9 points in July is the second lowest value of the series.

The lower the index compared to one hundred points, the greater the pessimism of industry companies on the current situation and the intention of new investments. The increase in July is a slight boost in optimism in the industry.

This is some small welcome news given the decline in federal revenues due to the weakening Brazilian economy led the country’s economic team to announce the reduction of the primary surplus from 1.1 percent this year to 0.15 percent. The primary surplus target, which at the beginning of the year was set at R$66.3 billion (US$20.53 billion), has been lowered to R$8.747 billion (US$2.708 billion).

Other negative trends for Brazil to overcome is that commerce in Brazil grew by 2.6 percent between January and June of 2015 in comparison to the same period last year. This constitutes the lowest increase registered for the first semester of a year since 2002, according to data published on July 7th by consultancy Serasa Experian.