Manufacturing in Brazil recovers from protest-related downturn
Staff Writer |
The health of Brazil’s manufacturing industry improved in July, after deteriorating during June in the aftermath of a nationwide truckers’ protest.
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However, the recovery was only modest as signalled by slight expansions in factory orders, production and jobs.
At the same time, export sales decreased, while concerns over political and economic challenges continued to restrict business sentiment.
Meanwhile, the weaker currency coupled with low stock levels at suppliers contributed to the third-sharpest rise in cost burdens in the history of the survey.
The seasonally adjusted IHS Markit Brazil Manufacturing Purchasing Managers’ IndexTM (PMI) posted 50.5 in July, signalling a slight improvement in business conditions across the sector.
This followed from a reading of 49.8 in June, when deterioration was seen for the first time in 15 months.
Supporting the upward movement in the PMI was a recovery in new orders.
Firms suggested that sales were boosted by new product launches, a pick-up in demand and greater client bases.
However, the upturn in new work was only marginal, constrained by a renewed decline in export sales.
In fact, new orders from abroad decreased at the quickest pace in 17 months.
Having displayed a marked drop in June, production increased at the start of the third quarter, as companies worked through outstanding business amid efforts to fulfil order requirements.
Encouragingly, employment returned to growth territory.
According to panellists, job creation reflected capacity expansion plans and projects in the pipeline.
Nevertheless, the overall rate of workforce growth was modest and curtailed by initiatives to curb outlays at some plants.
Fuelled by currency depreciation, cost burdens increased sharply in July.
Indeed, the rate of inflation was the third-highest historically.
Concurrently, goods producers raised their own charges to the greatest extent since February 2016.
July data pointed to a renewed rise in quantities of purchases, with companies reportedly responding to improved demand and growth projections.
At the same time, raw material scarcity at vendors led to longer delivery times and another decline in manufacturers’ holdings of inputs.
Inventories of finished goods decreased in July, with stock-building efforts reportedly stymied by a lack of inputs for use in the production process.
Panellists forecast that investment intentions, demand growth and business expansion plans will drive output higher over the coming 12 months.
However, confidence was hampered by worries surrounding political and economic crises.
The overall level of positive sentiment dipped to a ninemonth low. ■