Brazil: Manufacturing PMI ticks down in December
January 2, 2020
Conditions in Brazil’s manufacturing sector improved at the weakest pace in five months in December, with the manufacturing Purchasing Managers’ Index (PMI) edging down to 50.2 from 52.9 in November. Consequently, the PMI edged closer to the 50-threshold, however continued to signal an overall improvement in business conditions in the manufacturing sector.
The manufacturing sector weakened at the close of 2019, as both new orders and output growth moderated. New business inflows rose at the weakest pace in seven months, dragged on by the sharpest decline in exports orders in over a decade due to frail demand from Chile and Argentina. This passed through to hiring activity, which fell for the first time since July. Spare capacity also prompted goods producers to reduce backlogs of work at a quicker clip and scale back purchasing activity, leading inventories to decline notably. Despite weaker conditions, business confidence hit an almost one-year high as manufacturers cited better economic conditions and stronger investment as upsides to the outlook.
In terms of price, input cost inflation accelerated in December, partly due to a depreciating real against the dollar. Even so, output charges rose only marginally as weak demand limited manufacturers’ ability to raise prices.
Commenting on December’s result, Pollyanna De Lima, Principal Economist at IHS Markit noted:
"The disappointing reading seen in December acted to partially cancel out strong gains in October and November, with the performance of the sector over the final quarter of 2019 broadly in line with that noted in the third quarter. This indicates that the sector has only made a marginal contribution to economic growth in Q4.”
Author: Lindsey Ice, Economist