Sharper contractions in output and order books in Brazil
Staff Writer |
The health of Brazil’s manufacturing industry deteriorated in December, as the ongoing economic recession continued to weigh on the sector’s performance.
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A steeper fall in new work resulted in sharp reductions of production, quantities of purchases and staffing levels.
Meanwhile, cost inflation hit a four-month high, leading to a stronger increase in factory gate charges. The headline Markit Brazil Manufacturing Purchasing Managers’ Index (PMI ) dipped from 46.2 in November to a six-month low of 45.2 in December, highlighting a sharper deterioration in operating performance across the sector.
The downward movement in the PMI reflected quicker falls in new business inflows and production. Amid reports of weak underlying demand, a difficult economic climate and competitive pressures, the level of incoming new work received by Brazilian goods producers dropped to the greatest extent in six months during December.
Demand from external markets also deteriorated, with new export orders declining at a sharp and accelerated pace. As a consequence, businesses continued to scale back production volumes.
Moreover, output decreased at the fastest rate since June, with reductions noted in each of the three broad areas of manufacturing. As was the case for order books, the downturn in activity was most pronounced at capital goods companies.
Falling workloads translated into further reductions in manufacturing employment, thereby marking a 22-month sequence of continuous job shedding. The steepest decline in payroll numbers was registered at capital goods producers.
In spite of the ongoing reduction in employment, Brazilian manufacturers had sufficient resources to work on existing projects, as highlighted by another decline in outstanding business.
The rate of backlog depletion eased to the slowest since April, but remained sharp overall. Companies maintained a preference for lower stock levels in December, with both pre- and postproduction inventories down sharply over the month.
The former declined in line with a further contraction in buying levels. According to surveyed firms, fewer output requirements and cash flow issues were the main reasons behind the latest drop in quantities of purchases.
Average delivery times facing Brazilian manufacturers increased during December, amid reports of low stock levels at vendors and efforts to optimise deliveries. ■