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Manufacturing sector in Brazil continues to grow strongly at the end of 2017

Staff Writer | January 4, 2018
Brazil’s manufacturing economy improved further in December, with a sustained upturn in new work supporting growth of output and input buying.
Brazil manufacturing
Brazil   IHS Markit Brazil Manufacturing PMI
Rates of expansion eased from the recent highs seen in November, but were nonetheless robust in the context of historical survey data.

Moreover, companies took on additional staff to the greatest extent in nearly five years as they grew more confident about the outlook.

Meanwhile, the rate of input cost inflation moderated, as did that for selling prices.

Despite falling from November’s 81-month peak of 53.5 to 52.4 in December, the seasonally adjusted IHS Markit Brazil Manufacturing Purchasing Managers’ IndexTM (PMI ) indicated that the health of the sector improved strongly at the end of 2017.

For the final quarter as a whole, the PMI averaged 52.3, its highest mark since Q1 2013.

Both new business inflows and production expanded for the tenth month in a row.

Although rates of growth softened from the highs seen in November, they remained marked by historical standards.

Survey participants commented that the upturns were supported by sustained increases in domestic and external demand as well as product diversification.

New business from abroad indeed rose, but to a lesser extent than that for total new orders.

The improvement in demand, combined with machinery breakdowns and shortages of resources, led to another decline in stocks of finished goods.

The fall was the most pronounced since February.

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In c re a s in g ra te o f g ro w th IH S M a rk it B ra z il M a n u fa c tu rin g P M I Inventories of raw materials and semi-finished products also decreased to the greatest extent in ten months, despite another expansion in quantities of purchases.

Higher sales and projections of business growth encouraged some manufacturers to step up hiring.

The pace of job creation was modest, but the strongest in nearly five years.

Concurrently, the degree of optimism towards the 12-month outlook for output climbed to the joint-highest on record.

Forecasts of better economic conditions, greater investments, lower borrowing costs and export opportunities were the main factors boosting sentiment in December.

Firms reportedly paid more for inputs (on average), with commodities, fuel and energy up in price at the end of 2017.

Despite easing from November’s 17- month high, the rate of cost inflation remained sharp.

Output prices were raised as a consequence, although also to a lesser extent than in November.

Goods producers signalled a further decline in outstanding business, as there remained spare capacity despite ongoing increases in sales.

Finally, suppliers’ delivery times lengthened on the back of buying activity growth, bottlenecks and a lack of available raw materials at some distributors.