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UPDATE 1-Brazil's industrial output rises for 2nd straight month in May

(Adds background, comments) BRASILIA, July 4 (Reuters) - Industrial output in Brazil rose for a second straight month in May, government data showed on Tuesday, underpinning hopes that the economy will not fall back into recession despite an escalating political crisis. Industrial production rose 0.8 percent in May from April after seasonal adjustments, statistics agency IBGE said. The median estimate in a Reuters poll projected an increase of 0.6 percent, following a rise of 1.1 percent in April. Production in May grew 4.0 percent from a year earlier, the fastest increase since February 2014. Output grew on a monthly comparison in 17 of the 24 sectors covered by IBGE. Automobile production jumped 9.0 percent, supported by strong exports that also helped Brazil's trade balance record their two largest monthly surpluses on record in May and June. Brazil's economy is expected to grow 0.4 percent in 2017 after two years of deep recession, according to a weekly central bank poll of economists. Analysts and policymakers have cut their estimates for this year's growth after a graft scandal threatened to topple President Michel Temer's year-long administration. Industrial output, despite its recent improvement, remains 18.5 percent below its June 2013 peak, IBGE said. "This increase needs to be put into context," IBGE economist André Macedo said. "There is a lot to be done for industry to recover the losses of its recent past."

(Percent change) m-m y-y Capital goods 3.5 7.6 Intermediate goods 0.3 2.9 Consumer goods 1.3 5.0 Durable consumer goods 6.7 20.7 Semi-durable and non-durable consumer 0.7 1.4

goods

Industrial output 0.8 4.0

(Reporting by Silvio Cascione; Editing by Chris Reese)