Brazil industry expands in October, capital goods slow

* Oct output rises 0.6 pct from Sept., beats estimates

* Capital goods rise for 3rd month, though at slower pace

By Asher Levine

SAO PAULO, Dec 4 (Reuters) - Brazilian industry posted its

third straight month of timid gains in October, though capital

goods manufacturing expanded at a slower pace, suggesting that a

recovery in one of the weakest parts of Brazil's economy remains

on shaky ground.

Industrial production in Brazil rose 0.6 percent

in October from September, government statistics agency IBGE

said on Wednesday, exceeding all estimates in a Reuters survey

of 28 analysts, which ranged from a contraction of 0.5 percent

to an expansion of 0.5 percent.

Brazilian industry has had a mild recovery so far in 2013,

with output rising 1.6 percent in the first 10 months from the

same period last year, IBGE said. Growth has come in starts and

stops, however, as businesses continue to struggle with

competition from abroad, high tax and labor costs, and poor

infrastructure.

Even with industry expanding for three straight months, it

has yet to make up for the 2.5 percent decline seen in July from

June.

Data on Tuesday showed Brazil's economy shrank 0.5 percent

in the third quarter, contracting for the first time since early

2009. The industrial contribution to gross domestic product was

just 0.1 percent, while investment fell by 2.2 percent from the

previous three months, as stifling costs and sour business

sentiment discouraged capital spending.

Capital goods production expanded 0.6 percent in October

from September, down from a 4 percent monthly expansion in

September and a 2.3 percent advance in August, suggesting

businesses are continuing to brace for tougher times ahead.

October's industrial production expanded 0.9 percent from a

year earlier, exceeding the 0.4 percent increase

forecast in the Reuters survey. Estimates ranged from a 0.8

percent increase to a 2.30 percent decrease.

After a 2.7 percent contraction in 2012, economists expect

industrial output to grow 1.69 percent this year, according to

the median forecast in a central bank poll. One month ago the

survey forecast industrial growth of 1.77 percent.

Of the 27 industrial sectors surveyed by IBGE, 21 expanded

in October from September, including machinery and equipment,

oil refining and mining.

In broader industrial categories, consumer and intermediate

goods both rose 0.3 percent.

IBGE also revised some data from previous months.

September's industrial growth from August was revised to 0.5

percent from 0.7 percent previously.

(pct change) Oct/Sept Oct'13/Oct

'12

Capital goods 0.6 18.8

Intermediate goods 0.3 -0.7

Consumer goods 0.3 -1.3

Durable consumer goods -0.6 -3.2

Semi-durable and 1.0 -0.7

non-durable consumer goods

Industrial output 0.6 0.9