Brazil's industrial production declined by 0.5% in May compared to April, marking the second consecutive monthly decrease, according to data released by the Brazilian Institute of Geography and Statistics (IBGE). The industrial output also fell by 3.3% compared to May 2024. Despite this short-term contraction, the industrial sector showed a 2.8% growth over the past 12 months. Retail sales also decreased by 0.2% in May. Meanwhile, broader economic activity, as measured by the Central Bank's Economic Activity Index (IBC-Br), contracted by 0.7% in May, representing the first decline in 2025. This downturn exceeded expectations and is attributed to high interest rates and the looming threat of U.S. tariffs, which pose challenges for President Luiz Inácio Lula da Silva's administration and the Central Bank. Additionally, Brazil's debt outlook has worsened, with government projections indicating that the country's debt will rise to 82.3% of GDP by 2026, a 10.6 percentage point increase since Lula took office, signaling growing fiscal pressures.