Record Bounce In Industrial Output

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Brazilian industrial production (IP) growth soared on a year-on-year basis in December 2009 by a staggering 18.1%, its highest growth rate at least since 1992. However, on the month-on-month basis industrial output declined for the second consecutive month, suggesting that the rebound in IP seen throughout last year peaked in Q409. The spike in the year-on-year growth rate, though, reflects the extremely low base effects set in December 2008, when Brazil's economy went into a tailspin. A closer look at the IP figure for December reveals that the output number was mainly driven by durable consumer goods output, which spiked by a whopping 72.1% y-o-y as the accompanying chart illustrates. In our view this highlights growing confidence in the economy and particularly the Brazilian consumer, particularly as inventory levels remain low.