Factories in Brazil continued to gain steam in November, registering the strongest expansion in output for eight months as inflows of new work strengthened.
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With demand growth picking up pace, companies hired additional workers and purchased more inputs for use in the production process.
In turn, this led to the first rise in stocks of raw materials and semi-finished items in close to four years.
Moreover, business confidence improved to the highest seen in the series history, while a relatively stronger real translated into softer increases in input costs and output charges.
Rising from 51.1 in October to 52.7 in November, the seasonally adjusted IHS Markit Brazil Manufacturing Purchasing Managers’ Index (PMI®) pointed to the strongest improvement in the health of the sector for eight months.
Total new orders increased at the quickest pace since April amid reports of stronger domestic and international demand.
Furthermore, growth was seen in each of the three monitored sub-sectors and led by consumer goods.
New export orders displayed a renewed increase midway through the final quarter of 2018, after decreases were seen in September and October.
Companies scaled up production and hired additional workers, both to the greatest extent since March.
At the same time, quantities of purchases increased, following contractions in each of the previous three months.
Panellists suggested that the upturn reflect inventory-replenishment initiatives and forecasts of sales growth.
Indeed, holdings of raw materials and semi-finished materials increased during November.
Although slight overall, the upturn was the first seen in almost four years.
On the other hand, holdings of finished goods continued to fall as manufacturers fulfilled existing and new contracts.
Goods producers indicated that recent improvements in the BRL translated into a softer increase in cost burdens.
Firms still noted higher prices for items such as chemicals, fuel, metals and textiles, but mentioned a reduction in cardboard, caustic soda, glycerol, solvents, silicone and thread costs.
The rate of inflation was at a 16-month low.
Likewise, a softer rise in selling prices was registered in November, one that was the least marked since October 2017.
Meanwhile, backlogs of work decreased as a reflection of increased efforts to deliver items on time.
On the supply side, there was a further increase in delivery times, which panellists linked to stronger demand for inputs and low stock levels at vendors.
Manufacturers' sentiment improved to a series record in November on the back of merger opportunities, investment intentions and a change in government.
Around 77% of firms were confident that output will expand in the coming 12 months, with only 1% of companies pessimistic. ■