The Sound Of BRICs Breaking: Brazil CapEx To Contract 10% This Year

SAO PAULO, March 18 (Reuters) - Investment in Brazilian industry is likely to contract 9.5 percent this year, the São Paulo State Federation of Industrialists said on Monday, throwing cold water on hopes that rebounding manufacturers could bolster a fragile economic recovery. FIESP, as Brazil's most influential industry lobby group is known, based its estimates on a survey of more than 1,200 companies reporting investment intentions for 2013. Less spending on machinery and equipment could hamper economic activity in the short term and contribute to chronic inflationary pressures, researchers said, as supply falls farther short of robust consumer demand in Brazil's economy. Manufacturing has dragged on Brazil's economic growth in recent years, hurt by weak global demand and structural challenges such as rising labor costs and poor infrastructure. Stronger-than-expected industrial growth in January had contributed to economists' forecasts for a roughly 3 percent increase in production this year, after output contracted 2.7 percent in 2012. Those numbers were boosted by a passing surge in heavy truck sales, as well as growth in oil and agriculture sectors not entirely reflected in the FIESP survey.

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