Brazilian manufacturing industry’s health bolsters in June, PMI index rises to 51

The health of the Brazilian manufacturing industry bolstered in June, after rebounding just marginally in the prior month. The seasonally adjusted IHS Markit Brazil Manufacturing PMI index rose to 51 in June from May’s 50.2. Nevertheless, relatively soft readings throughout the June quarter signified that the latest three-month average was the lowest since the third quarter of 2018.

Capital goods was the main spot in June, surpassing the intermediate and consumer goods sub-sectors about production, sales and input purchasing. Whereas intermediate goods companies recorded growth of all aforementioned measures, contractions were clear among consumer goods companies. Aggregate manufacturing output rose in the midst of reports of sales growth and productivity gains. The rate of growth accelerated in June, but was the second-slowest since last October.

A renewed rise in new work intakes were seen in June, after growth came to a halt in May. Companies indicated that demand conditions rebounded at the end of the second quarter. Data implied that the domestic market was the main source of sales growth, as exports shrunk at the most rapid rate in 29 months.

Goods producers scaled up their quantities of purchases in June in order to fulfil order obligations. The upturn in input purchasing followed a contraction in May. Supplies were comfortably able to accommodate for the rise in input demand, as hinted by shorter lead times on purchased materials. Subsequently, manufacturers’ preproduction stocks increased further.

Business confidence rebounded from May’s 19-month low, with firms expecting new contract wins, product diversification and structural reforms to aid output growth in the 12 months ahead. Input costs rose again, which firms commonly linked to US dollar appreciation making imported materials costlier. The rate of inflation continued to be sharp, in spite of easing to a three-month low.