Brazilian manufacturing economy rebounds further in December

Brazilian manufacturing economy rebounded further at the end of 2017, with a sustained upturn in new work underpinning growth of output and input buying. The seasonally adjusted IHS Markit Brazil Manufacturing PMI Index dropped to 52.4 from 53.5. Despite falling from November’s 81-month peak, the December figure indicated that the health of the sector rebounded strongly at the end of 2017. For the final quarter as a whole, the PMI averaged 52.3, its highest mark since the first quarter of 2013.

Both new business inflows and production grew for the 10th consecutive month. Although rates of growth weakened from the highs seen in November, they continued to be marked by historical standards. Survey participants commented that the upturns were underpinned by sustained rises in domestic and external demand as well as product diversification. New business from abroad rose, but to a lesser extent than that for total new orders.

The rebound in demand, along with machinery breakdowns and shortages of resources, resulted in another decline in stocks of finished goods. The fall was the most pronounced since February. Inventories of raw materials and semi-finished products also dropped to the greatest extent in ten months, in spite of another growth in quantities of purchases, noted IHS Markit.

Increased sales and projections of business growth encouraged some manufacturers to step up hiring. The rate of job creation was moderate, but the strongest in almost five years. Simultaneously, the degrees of optimism towards the 12-month outlook for output rose to the joint-highest on record. Projections of better economic conditions, greater investments, lower borrowing costs and export opportunities where the main factors stimulating sentiment in December.

Companies reportedly paid more for inputs, with commodities, fuel and energy up in price at the end of 2017. In spite of easing from November’s 17-month high, the pace of cost inflation remained sharp. Output prices were increased as a result, although also to a lesser extent than in November.

Goods producers hinted a further decline in outstanding business, as there remained spare capacity in spite of ongoing increases in sales.

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