Brazil: Manufacturing PMI falls to almost 7-year low
December 1, 2015
The Markit manufacturing Purchasing Managers’ Index (PMI) fell from October’s 44.1 to 43.8 in November, which marked the worst result in 80 months. As a result, the PMI remains far below the 50-threshold that separates contraction from expansion in business conditions in the manufacturing sector. Brazil’s economy has been plagued with a slew of bad economic data that suggest the economy’s deep recession shows no signs of abating.
According to Markit, November’s downturn came on the back of significant drops in both new orders and production. Shrinking demand and a grim economic situation across the country fueled a drop in new orders from Brazil, which was combined with a slight fall in foreign orders. As a result, output fell and companies purchased fewer inputs than in the previous month. Moreover, the shaky economic situation caused firms to shed jobs at the fasted pace in 79-months . In addition, the weak value of the real along with tax increases caused cost inflation to rise to a 7-month high in November. Markit analysts added that, “the outlook for the sector looks bleak. Falling employment combined with rising tax rates, soaring borrowing costs and a subsequent drop in income look set to deepen the country’s downturn. Even the weaker currency is failing to lift foreign orders. Higher cost burdens are proving to have a greater detrimental impact on firms, which struggle to compete at the global level in an already-subdued demand environment."