Brazil's industrial output up 0.1% in August after July drop

SAO PAULO, Oct 2 (Reuters) - Brazil's industrial production grew in line with market expectations in August, data from statistics agency IBGE showed on Wednesday, reversing some of the losses registered in the previous month despite high interest rates.

Industrial output in Latin America's largest economy was up 0.1% in August from July, IBGE said, and expanded 2.2% from a year earlier. Both figures were in line with economists' forecasts in a Reuters poll.

IBGE acknowledged the small month-on-month growth meant production in August was almost stable, which was enough to put the sector back in positive territory after a 1.4% drop in July.

"When we look at the last three months the balance is positive, as industry grew 4.4% in June. And the quarterly moving average has also maintained a positive trend since mid 2023," IBGE research manager Andre Macedo said in a statement.

The August result was mainly driven by a 1.1% increase in the extractive industries, IBGE said, which helped to offset a drop in auto production.

Andres Abadia, Pantheon Macroeconomics' chief economist for Latin America, said that data had pointed to a sluggish overall performance in the third quarter with a modest improvement in the following three-month period.

"Brazil's industrial sector is not out of the woods yet, and downside risks remain due to a still-faltering domestic recovery, elevated interest rates and high external risks," he wrote in a note to clients.

Elevated borrowing costs damaged the sector in early 2023.

Production started to pick up in the second half of last year with the central bank easing monetary policy, but may suffer again as policymakers last month voted to begin a new tightening cycle following stronger-than-expected economic activity. (Reporting by Gabriel Araujo; editing by Barbara Lewis)