Brazil's 2024 industrial output notches annual gain but drops at year-end

Adds background, quotes from IBGE survey manager and economist throughout

SAO PAULO, Feb 5 (Reuters - Industrial production in Brazil expanded in 2024, official data showed on Wednesday, but a third consecutive monthly drop in December reinforced signs of an economic slowdown.

Production rose 3.1% for the full year, statistics agency IBGE said, the best performance since 2021 - when the Brazilian economy was recovering from the pandemic - but lost steam late in the year as financial conditions tightened.

Industrial output fell 0.3% in December from November, slightly less than the 0.5% decline projected in a Reuters poll.

The monthly result corroborates expectations of a loss of economic momentum at the end of 2024 and a potential slowdown in 2025, economists say.

The loss of dynamism in the sector is "largely explained by the tightening of monetary policy," IBGE's survey manager Andre Macedo said in a statement, also citing currency depreciation and high inflation.

Brazil's central bank in its latest monetary policy decision hiked interest rates by 100 basis points to 13.25% and signaled a matching increase at its next meeting, as policymakers seek to curb rising consumer prices.

"After peaking in June, Brazil's industry slowed down in the second half of the year and could be in negative territory in 2025 due to high interest rates and an expected drop in demand," lender Inter's chief economist Rafaela Vitoria said.

On a yearly basis, production in December grew 1.6%, IBGE said, above the 1.1% rise forecast in the Reuters poll.