Brazilian manufacturing industry’s growth momentum eases in March, PMI index falls to 52.8

The Brazilian manufacturing industry continued to strengthen in March, although there was a slight easing in growth momentum. The IHS Markit Brazil Manufacturing PMI dropped from February’s 11-month high of 53.4 to 52.8 in March. Today’s reading is in line with a strong, albeit slower, strengthening of business conditions throughout the sector.

New orders and employment weighed on the headline index, both rising at slower rates in March. The rise in jobs was the softest in the current three-month sequence of growth and only slight. While some companies hired extra staff because of demand growth and a greater requirement for qualified labor, others cut payrolls in the midst of ongoing cost-reduction initiatives.

In spite of easing, the rise in new orders was strong and more solid than seen on average in 2018. Firms recorded greater consumption, new client wins and stronger domestic demand. Meanwhile, export sales fell for the fourth straight month. However, the fall was just minor as the securing of new work at companies that benefited from real softness partially countered contraction at those that cited subdued global demand.

Brazilian manufacturing production rose for the ninth straight month in March and at the most rapid rate in one year. Panellists stated that he rise reflected greater inflows of new work, attempts to stimulate inventories and positive growth projections.

Part of the goods produced in March were placed into inventories, as underlined by back-to-back rises in holdings of finished goods. The rise was slight and dropped from mid-quarter. Input stocks also grew, and at a similarly modest pace to February. Anecdotal evidence implied that the rise in inventories stemmed from greater purchasing activity. Input buying increased for the fifth consecutive month and was the greatest extent in one year.

The rate of input price rise due to the depreciation of BRL/USD, said the panellists. The rise in cost burdens was the sharpest in five months and above the long-run series average. Equally, charge inflation rose to a five-month high. Business sentiment continued to be positive as manufacturers forecast greater client bases capacity growth, investment in machinery and supportive public policies to stimulate over the coming 12-month period.