By Gabriel Araujo and Camila Moreira

SAO PAULO (Reuters) – Industrial output in Brazil rose 0.3% in May from April, government statistics agency IBGE said on Tuesday, the fourth consecutive monthly increase but below market expectations of a 0.7% rise.

According to IBGE, the four-month uptick might be related to government stimulus measures such as releasing money from severance funds and bringing forward bonus payments for retired people.

“These things might be bringing some positive impact to the industrial sector, in addition to an improvement in the labor market as the unemployment rate dropped,” research manager Andre Macedo said in a statement.

Andres Abadia, LatAm economist at Pantheon Macroeconomics, called the May figure a “decent performance despite undershooting expectations.”

The positive four-month series, however, was still not enough to offset the 1.9% drop posted in January as Latin America’s largest economy still looks to fully recover from the downturn triggered by the coronavirus pandemic.

Brazil has been grappling with galloping inflation and high interest rates, which have kept its industrial output growth at moderate levels.

“There is still a lot of room to be recovered,” Macedo said, noting that several companies are still struggling to get components for their final assembly as well as facing rising production costs.

In May, 19 of the 26 categories surveyed posted positive readings from the previous month, with machines and equipment up 7.5% and motor vehicles rising 3.7%, IBGE said.

The agency also noted production rose 0.5% from the year-earlier period.

That broke a series of nine straight decreases on a yearly basis, but missed forecasts as economists polled by Reuters had expected 1.1% growth.

Brazil’s industrial output remains 1.1% below the levels seen in February 2020 prior to the pandemic, and 17.6% below the peak in May 2011.

(Reporting by Gabriel Araujo and Camila Moreira; Editing by Andrew Heavens, Bernadette Baum, Paul Simao and Alison Williams)

Copyright 2022 Thomson Reuters.

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