Manufacturers in Brazil record sustained recover in business conditions, February PMI index rises to 53.2

Manufacturers in Brazil have recorded sustained recovery in business conditions in February, aided by a strong and accelerated upturn in new order volumes. The seasonally adjusted IHS Markit manufacturing PMI rose to 53.2 in February from 51.2. Furthermore, the headline index hinted at one of the most robust improvements in operating conditions seen in the past five years.

The data for February pointed to a strong increase in manufacturing output levels, with the pace of growth the strongest for three months. Survey respondents noted that production schedules had been stimulated in response to improved new order books and expectations of a sustained upturn in client demand.

The latest rise in total new work was one of the most rapid since the beginning of 2013, which survey respondents linked to greater sales in domestic markets. On the contrary, export orders fell for the second straight month, although the pace of fall was just modest. Employment figures rose throughout the manufacturing sector at the strongest pace for nearly seven years in February. Anecdotal evidence implied that stronger business sentiment was a key factor aiding to underpin staff hiring plans. Attempts to stimulate operating capacity contributed to a further marked fall in incomplete workloads, with the rate of backlog depletion the sharpest since January 2017.

There were signs that rebounded demand and longer lead-times from suppliers have led to reduced caution about warehouse inventories. Reflecting this, stocks of finished goods stabilized in February, while pre-production inventories dropped at the slowest rate for three years. In the meantime, survey respondents recorded that higher steel prices were an important factor placing pressure on cost burdens in the month. The overall pace of input price inflation eased to a four-month low but stayed much stronger than seen on average since the survey started in 2006.

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