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Further steep declines in manufacturing in Brazil

Staff Writer | July 8, 2016
The Brazilian service sector remained stuck in contraction in June, with activity, new business and employment all falling sharply over the month.
Brazil manufacturing
LatAm   Markit Brazil Services PMI with Composite PMI data
Although slowdowns were recorded, rates of reduction were severe in all three cases. Higher energy, petrol and food costs led to a stronger rise in input prices, but weak client demand meant that companies continued to lower their charges.

The seasonally adjusted Markit Brazil Services Business Activity Index stayed well below the 50.0 no-change mark in June, posting 41.4, up from 37.3 in May and signalling a reduction in services output for the sixteenth month running.

Although the rate of contraction slowed to the weakest since January, it was still sharp. Respondents highlighted tough economic conditions and falling new business as the main factors leading to the latest drop in activity.

Manufacturing production also contracted at a steep, but slower pace. Subsequently, the seasonally adjusted Markit Brazil Composite Output Index rose from May’s record low of 38.3 to 42.3 in June. That signalled a sharp drop in private sector activity, albeit the weakest since January.

New business at services firms decreased at a pace that was the slowest in seven months, but steep nonetheless. Panellists reported reluctance among clients to commit to new projects given the economic crisis in Brazil.

Order books at manufacturers fell sharply, although at the weakest rate since March.