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Brazil PMI April 2020

Brazil: Manufacturing PMI plunges to series low in April

The manufacturing Purchasing Managers’ Index (PMI), produced by IHS Markit, plummeted to 36.0 in April from 48.4 in March, marking the sharpest deterioration in operating conditions since the survey began in February 2006. Consequently, the PMI fell further below the 50-threshold signaling a substantial worsening in business conditions in the manufacturing sector over the previous month.

The Brazilian manufacturing sector was battered by the impact of the Covid-19 pandemic in April, as both new orders and production fell at record rates in the month. Factory closures and other restrictions to contain the virus caused major setbacks in output, while export sales sank notably. In turn, manufacturers cut staff levels at the sharpest pace in nearly four years and pulled back purchasing activity at a record clip.

On the supply-side, ongoing disruptions to global supply chains as a result of the pandemic led supplier delivery times to lengthen to the second-greatest extent in the survey’s history.

Business sentiment in the sector fell to an over four-year low as manufacturers became more pessimistic about how long it would be before conditions returned to normal. Andrew Harker, economics director at IHS Markit, commented that manufacturers’ “confidence that a swift rebound will be recorded is draining away as firms begin to foresee a long, hard road ahead”.

Exacerbating matters, inflationary pressures intensified in April, despite anemic demand. Input cost inflation accelerated sharply, largely due to a stronger U.S. dollar pushing up input prices. In response, goods producers raised output prices markedly.

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