Brazil Dec industry output down less than expected

Industrial output in Brazil contracted less than expected in December from November, underscoring expectations of a rebound that Finance Minister Guido Mantega said could push growth in production as high as 7 percent in 2010.

Production edged 0.3 percent lower in December from November, statistics agency IBGE said on Tuesday.

Output was expected to have dropped 0.8 percent in December, according to the median forecast of 20 economists surveyed by Reuters. Estimates ranged from a 1.1 percent decline in output to 0.1 percent growth.

But data in November were revised to a 0.8 percent decline, from 0.2 percent drop reported previously, a sign Latin America's largest economy may be cooling down after months of steep growth.

For the year of 2009, output plunged 7.4 percent, the IBGE said, its greatest fall since 1990.

Mantega said the slump in output last year was expected due to the global economic crisis and production should post healthy expansion in 2010.

"This is something of the past," Mantega told an audience of business leaders. "In the present, industrial production is growing strongly."

December output contracted in nine of the 27 industrial sectors tracked by the agency, with the 12.2 percent slump in electronic and communications equipment and 1.2 percent decline in automobile production helping drag down the overall index.

"The fact that 17 out of 26 industrial sectors increased production is, in our view, a sign that the industrial recovery is widespread," Santander economist Luiza Betina Petroll Rodrigues wrote in an e-mailed note to clients.

"Therefore, this deceleration does not change our diagnosis of economic activity heating up, but it does point to a reduction of industrial GDP's contribution to overall GDP."

In broader industrial categories, capital goods production firmed 0.3 percent month-on-month in December, while durable consumer goods dropped 4.9 percent.

Industrial production surged 18.9 percent compared with December 2008, when manufacturing stumbled because of the turmoil in global financial markets, the IBGE said.

It was expected to have grown 18.4 percent, according to the median of forecasts that ranged from 15.5 percent to 20.7 percent.

Yields on Brazilian interest rate futures contracts, particularly among shorter-termed contracts, ticked higher in early trade.

The yield on the contract due January 2011, the most active contract of the morning, edged to 10.34 percent from 10.31 percent.