Macro and Politics

* The sequential (seasonally and calendar-adjusted monthly figure) industrial production (IP) index rose 2.1% m/m in September, exceeding our 0.5% forecast, while calendar-adjusted annual IP increased 2.6% y/y against our expectation of a milder contraction. Manufacturing output rose 2.3% m/m, with headline production recovering after two consecutive monthly declines. Capital goods production increased 8.2% m/m, while gains in intermediate, durable consumer and non-durable consumer goods ranged from 0.5% to 1.6%. This uneven performance suggests the headline rebound does not yet signal a comparable improvement in underlying domestic demand and investment conditions. Production of other transport equipment, which includes defense-related products, rebounded 29.4% m/m and 34.8% y/y following August’s sharp decline. High-technology production surged 26.1% m/m and 31.1% y/y, with strong increases also recorded in computer, electronic and optical products, and motor vehicles, trailers and semi-trailers. However, monthly and annual declines in fabricated metal products, basic metals and other non-metallic mineral products, alongside an 11.6% annual contraction in wearing apparel, underscore persistent weakness elsewhere in manufacturing. Despite September’s rebound, industrial and manufacturing output contracted 1.8% and 2.2% q/q, respectively, in Q3, with calendar-adjusted annual growth limited to 0.2% in both. The manufacturing PMI’s decline to 47.3 in October, alongside faster contractions in output and new orders, casts doubt on the recovery’s durability. Real card spending and confidence indicators also remain consistent with slowing domestic demand. We expect Q3 GDP growth of around 3.2% y/y, supported by a strong recovery in agriculture amid favorable base effects and contributions from non-industrial sectors. Given our cautious Q4 outlook, we maintain our house forecast for 2026 growth at 2.8%, following the recent downward revision from 3.2%.