Brazil January Auto Sales Fall 8% as Economy Stalls

Brazil’s vehicle sales fell last month from a year earlier as rising borrowing costs and job cuts prompted by the global economic slowdown damped sales for a fourth month. Shares of auto-parts makers fell.
Sales of new cars, trucks and buses fell to 197,500 in January, an 8.1 percent slide from a year earlier, Brazil’s automakers association, known as Anfavea, said in Sao Paulo today. From December, new registrations rose 1.5 percent while vehicle production jumped 93 percent. Output fell 27 percent in the 12 months through January.
Latin America’s largest economy stalled in the fourth quarter of 2008 as the global financial crisis began to undercut consumer demand and commodity prices fell. Brazilian companies eliminated jobs at a record pace and industrial output declined the most in 17 years in December.
“There is clearly a deceleration, and it’s a strong one,” said Leticia Costa, president of the Brazilian unit of consulting firm Booz Allen Hamilton Inc., in an interview from Sao Paulo. “Credit conditions have improved, but not to the levels prior to the sales slowdown.”
Yields on interest rate futures rose and the real gained while shares of auto parts makers fell in Sao Paulo trading.
Economists covering Brazil lowered their 2009 economic growth forecast to 1.7 percent, from 1.8 percent the week before, according to the weekly central bank survey of about 100 institutions taken Feb. 6 and published today.
Lower Growth
Brazilian President Luiz Inacio Lula da Silva said on Feb. 3 that he couldn’t rule out a contraction of the country’s economy this year, without elaborating on scale of the possible decline. The auto industry accounts for about 5 percent of Brazil’s gross domestic product.
Policy makers last month lowered Brazil’s benchmark interest rate by a full percentage point, the first cut in 16 months and the biggest in five years. Economists covering the Brazilian economy expect another reduction at the March 10-11 meeting, to 12 percent from 12.75 percent.
Consumers, worried about job and salary cuts, reduced purchases of durable goods such as home appliances, computers, building materials and cars.
Sales, Shares
A broader measure of retail sales that includes construction goods, vehicles and motorbikes declined 4.1 percent in November from a year earlier, according to the national statistic agency.
Vehicle sales figures pushed down shares of auto-parts makers in Sao Paulo trading. Randon Participacoes SA fell as much as 2 percent before paring declines to trade down 1.3 percent to 5.92 reais at 11:14 a.m. New York time. Iochpe Maxion SA dropped 2.3 percent to 9.48 reais and Marcopolo SA fell 1.9 percent to 3.09 reais.
The decline in vehicle exports mirrors the slide experienced by other Brazilian industries.
Brazil had its first monthly trade deficit in almost eight years in January as exports plunged by a record amount on falling prices for the country’s commodities.
Exports fell 29 percent to $9.8 billion last month, the biggest month-over-month drop since 1991, the Trade Ministry said on Feb. 2.
“What we’re seeing in the global economy is serious,” said Tereza Fernandez, a consultant at Sao Paulo-based MB Associados. “Companies no longer need to boost capacity and I wouldn’t be surprised if they dismiss more workers.”
Vehicle exports in January fell 61 percent on year to 22,600 units from 57,187, and 48 percent from the 43,580 units in December.
Investment, Outlook
In September, Anfavea forecast automakers would spend about $18 billion in the 2009-2012 period to add plants, expand production lines and release new models.
The spending was aimed at boosting output capacity to 6 million units a year by 2013 from less than 4 million units last year, Anfavea said.
Automakers fired 1,900 workers in January, the third straight month of job cuts following two years of increasing headcount and new production shifts.
Vehicle sales and output, rising at record pace last year through September, lost steam in the end of 2008 as the global credit crunch made loans costlier and harder to obtain, damping demand for durable goods such as autos and computers.
The yield on Brazil’s overnight futures contract for January 2010 delivery rose to 11.12 percent from 11 percent on Feb. 6. The real gained to 2.2349 per U.S. dollar from 2.2435 on Feb. 6.