Brazilian industrial production data due

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Photo: REUTERS/Ricardo Moraes

The Brazilian Institute of Geography and Statistics will today release the country’s June industrial production data, which measures output of all industrial businesses, including manufacturing, mining and utilities.

Industrial production in Brazil has declined since November but fell over 20% year-on-year (YoY) in both April and May. Experts predict a 15% YoY decline in June, which would indicate that Brazil’s industrial production is slowly beginning to recover despite reporting over 45,000 new COVID-19 cases on Friday.

A quick rebound for Brazilian industry—nearly one fifth of the country’s GDP—could play a pivotal role in an economic recovery following an expected 13% contraction in the second quarter. However, given a 32.8% YoY decline in capital investments this April, especially in durable capital goods like machinery and equipment, Brazil’s industry may be running at reduced capacity in the short run.

While Brazil has made significant efforts to attract global investment from various sources, industrial recovery in the short-to-medium term could be decided by the future of Chinese tech company Huawei. In addition to its significant contributions to Brazil’s existing telecom infrastructure, Huawei currently operates smartphone manufacturing plants in Brazil. However, despite Brazil’s heavy trade and investment ties with China, mounting US pressure could prevent Huawei from rolling out Brazil’s 5G network in the near future, which could delay 5G deployment by years.

Even if President Jair Bolsonaro resists US pressure, expect Brazil’s industrial production to remain under capacity well into 2021.

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