Brazilian manufacturing output remains in expansion territory, PMI index rises to 51.1 in October

The ongoing growth of new work in Brazil continued to feed through to output, whilst raising employment in manufacturing for the first time in three months. The seasonally adjusted IHS Markit Brazil PMI index rose to 51.1 in October from September’s 50.9, hinting at strengthening business conditions for the fourth month running.

Furthermore, the headline index was at its joint-highest mark in six months. The launch of new products and continuous improvements in demand translated into new order growth in October. However, the upturn was only marginal and eased since September. Concurrently, exports fell further with several panellists citing fewer volumes of new work from Argentina.

Meanwhile, production rose just marginally as political uncertainly, weak household consumption and the elections limited output growth in October. However, the upturn was the fourth in as many months. Brazilian goods producers hired additional staff at the beginning of the fourth quarter in the midst of attempts to stimulate production. The increase in workforce numbers was only slight, but the most rapid since March.

Slight rises in new work, along with job creation, led to an additional fall in outstanding business. In spite of being strong, the fall in backlogs was the softest in the current four-month sequence of reduction. Softness in currency continued to drive input costs higher as the price of imported materials became costlier. The overall pace of inflation eased from September’s peak, but was among the sharpest in the survey history.

Some companies passed additional rises in cost burdens to their clients, but others refrained from hiking prices because of a competitive environment. The rise in charges was the slowest in six months. Brazilian manufacturers stayed positive that output would be higher in a year’s time. Sentiment was underpinned by beliefs of demand growth, gains in market shares, investment intentions and the end of the elections.

However, concerns regarding the high level of unemployment and economic uncertainty were a drag on sentiment that was at a three-month low. Inventories of inputs and finished items dropped moderately in October.