Brazil: Manufacturing PMI drops slightly to lowest level since September 2011

The Markit manufacturing Purchasing Managers’ Index (PMI) inched down from April’s 46.0 to 45.9 in May, thus dropping to the lowest level since September 2011. As a result, the PMI index remains below the 50-threshold that separates contraction from expansion in business conditions in the manufacturing sector.

According to Markit, May’s figure came on the back of the steepest fall in employment since July 2009. In addition, output contracted again in May, although at a slightly weaker pace than in April, and new business was broadly unchanged from April’s steep decline. Moreover, the firms surveyed indicated that high inflation rates and Brazil’s weakening economy have led to stifled demand. Regarding prices, purchase prices rose for the seventh consecutive month, largely on the back of an increase in electricity prices and raw material costs. In addition, the low value of the real drove up the cost of imported inputs. Markit analysts stated that, “consumer goods’ downward spiral continues, as job cuts and strong inflation rates affected the sector. Domestic consumption appears to be suffering from restricted access to credit, with Brazil’s Central Bank extending its tightening cycle in April as part of efforts to curb inflation. Given stubborn unemployment, the ongoing weakness of the domestic economy is likely to continue.”