Brazilian manufacturing sector’s demand conditions strengthen in March

Brazilian manufacturing sector’s upturn was stimulated by strengthening demand conditions in the month of March. The seasonally adjusted IHS manufacturing PMI rose to 53.4, the second-highest in more than seven years. This hints at a strong rebound in the health of the sector. In the first quarter as a whole, the PMI averaged 52.6 and indicated the most solid quarterly gain since first quarter of 2011.

Underlying demand reportedly recovered in March, supporting the second-fastest rise in order books since January 2013. Along with domestic sales, companies were able to secure new business from international sources. Especially, there were mentions of contract wins from Mercosur nations, Chile and Peru. The increase in new export orders was slight, but nonetheless the first in three months.

These positive developments urged manufacturers in Brazil to step up production. The growth in output was the second-strongest in more than five years and sharp overall. Part of the growth in production was accomplished through the completion of unfinished business. Backlogs dropped noticeably, though the rate of depletion was the slowest in three months.

In the midst repots of ongoing attempts to grow operating capacities, Brazilian manufacturers hired extra staff in March. The pace of job creation was widely similar to the 83-month peak noted in February. Companies purchased greater quantities of inputs in March, but delivery delays prevented stocks of purchases from rising.

Greatly due to higher prices paid for oil, fuel and some raw materials, average cost burdens rose. Moreover, the pace of inflation was sharp and above its long-run average.

Optimism remained at a historically-elevated level, as companies were confident that new product launches, favorable economic conditions, investment plans and pipelines of work would drive output growth over the coming 12 months.

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