Manufacturing production increases for first time in over two years in Brazil

Manufatura

Goods producers in Brazil recorded the first increases in output and order books for 26 months during March according to the Markit Brazil Manufacturing Purchasing Managers’ Index. The headline index was up from 46.9 in February to 49.6 in March.

“PMI data for March showed tentative signs of a turnaround in manufacturing. Companies benefited from rising levels of incoming new work and stepped up production accordingly. In both cases, the expansions were the first seen in over two years,” says Pollyanna De Lima, economist at IHS Markit and author of the report.

De Lima then comments although the upturn in manufacturing production is welcoming news it may be too early to say if it will be sustainable in the near term. She adds, “With employee numbers continuing to decline, underlying demand is likely to be shy at best in the near term.”

Output expected to rise

Survey participants indicated that output is expected to rise over the course of the next year, with more than two-thirds of firms upbeat regarding the outlook. New projects in the pipeline, capital investment plans, hopes of an economic turnaround and forecasts of stronger demand from externally based clients were among the factors cited by firms as likely to support growth.

March data pointed to spare capacity among goods producers as outstanding business continued to fall sharply. Concurrently, payroll numbers decreased for the twenty-fifth straight month. Despite being solid, the rate of job shedding softened to the slowest in one-and-a-half years.

The weaker Brazilian real relative to the US dollar, combined with higher global commodity prices, led to a further increase in firms’ input costs, with the rate of inflation sharp and well above its long-run average.

The Markit Manufacturing Purchasing Managers’ Index measures the performance of the Brazilian manufacturing sector and is derived from a survey of 400 industrial companies. 

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