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Brazil PMI September 2020

Brazil: Manufacturing PMI inches up in September as recovery continues

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, inched up to 64.9 in September from 64.7 in August, logging a new record high as the recovery from the fallout from the coronavirus health crisis continued. Consequently, the index moved further above the 50-threshold, signaling an improvement in business conditions in the Brazilian manufacturing sector.

September’s result largely came on the back of a notable increase in new orders owing to the further lifting of Covid-19 restrictions and firming demand dynamics. Moreover, new business from abroad rose for the first time in a year in September, expanding at the fastest clip in over four years and a half, likely reflecting currency weakness. Meanwhile, despite softening somewhat from August’s all-time high, output expanded again in the final month of the third quarter. In response to the uptick in sales and output, employment increased in the period as firms hired extra workers. Backlogs of work still rose at the fastest rate since the survey began in 2006, however, due to capacity pressures.

On the price front, both input costs as well as output charges rose at record rates in September due to a weak real against the U.S. dollar, raw material shortages, and strong input demand. Lastly, business sentiment in the manufacturing sector was upbeat in September as firms expected output to increase in the coming twelve months underpinned by investment and capacity expansion.

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