UPDATE 2-Brazil factory output sees record dive in Dec

Tue Feb 3, 2009 8:22am EST
Adds economists' comments, rate futures)
By Elzio Barreto
SAO PAULO, Feb 3 (Reuters) - Industrial production in Brazil posted its sharpest plunge on record in December, with factory output slowing around the country as companies coped with the global credit crunch and a slump in demand for exports, government data showed on Tuesday.
Output sank 12.4 percent month-on-month in December, far worse than the 6.6 percent median forecast of 23 analysts surveyed by Reuters. Forecasts for the decline ranged from 11 percent to 4 percent.
Brazil's economy, the largest in Latin America, came to a screeching halt in the final months of 2008 as automakers, appliance and electronic goods companies and steel producers sent workers home because of weak consumer demand.
The worse-than-expected plunge in output will likely force companies to slash jobs and pare investments, putting further pressure on the economy, analysts said.
"This is a really bad sign for the economy," said Pedro Tuesta, senior Latin America economist at research firm 4Cast Inc. in Washington. "It's dire for the job market, which has to adjust either by wages or employment."
December's drop was the worst since the data series began in 1991, the IBGE said. Production was revised lower in November to a 7.2 percent drop from a previously reported decline of 5.2 percent.
"This picture of widespread decline was specially influenced by the movement in sectors most sensitive to the restriction in credit and to the decline in exports of commodities," the IBGE said in a statement.
All but two of the 27 industrial sectors tracked posted sharp declines, with automobile production plunging 39.7 percent month-on-month, followed by a 19.2 percent tumble in machinery and equipment output and a 48.8 percent slump in production of electronic and communications tools.