The Brazilian Institute of Economy (IBRE1), publishes several surveys, including an industry confidence survey. This survey quantifies the general sentiment about the industrial sector in Brazil. The survey has three key indices: confidence, current situation and expectations. Both the confidence and current situation indices are composed of questions comparing current state to three months before. The expectations index is based on expectations six months into the future and compared against the expectations a year earlier.
The graph above shows the change in the three main indices between December 2012 and January 2013. The newest values for the confidence and current situation indices are the highest ones for the past year. The expectations index though posted a slight decrease, after hitting a high in December. Both the confidence and expectations index have now been for five consecutive months above their respective five year average. The data shows that the industrial sector prospects remain solid and likely means that the Brazilian economy is poised for continued growth after the past two years of sluggish growth.
This survey is a key data point for investors in the iShares MSCI Brazil Index (EWZ) or other small cap versions, as those by iShares (EWZS) and VanEck Vectors (BRF) should understand how the different components of the survey tie together to get a more in depth picture of the changes with respect to the previous period. This survey may also be helpful for investors in Latam ETFs, which generally have Brazilian exposures of approximately 50%, such as iShares Latin America 40 Index Fund (ILF), as well as emerging market ETFs, like the Vanguard VWO ETF. This is just one of several surveys published in Brazil and in Latam that can quickly give an investor insight into the market.
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