The health of the Brazilian manufacturing industry strengthened for the third consecutive month in October, reflecting ongoing growth of new work and production.
Companies responded by purchasing additional inputs, but hiring activity was muted.
Looking ahead, a strong degree of optimism was sustained.
Despite falling from 53.4 in September to 52.2 in October, the seasonally adjusted IHS Markit Brazil Manufacturing Purchasing Managers’ Index™ (PMI®) continued to show an improvement in overall business conditions.
Moreover, growth was sustained in the consumer, intermediate and investment goods categories.
Consumer goods was the best performing sub-sector.
Improving economic conditions and strengthening demand led to a further expansion in Brazilian factory orders at the start of the fourth quarter.
The overall upturn in sales was solid, despite easing to the weakest since July.
While total new work increased, external sales contracted for the second month running.
Among those exporters that reported lower international orders, there were mentions of demand weakness in Argentina and Paraguay.
In response to rising new orders, manufacturers scaled up production in October.
The upturn was the third in as many months and solid, despite easing from September.
While goods producers increased spending on inputs, employment was broadly stable.
Job creation at firms that sought to accommodate for strong sales was offset by cuts at companies that focused on cost-reduction measures.
On the purchasing front, there was a solid expansion that was broadly similar to that recorded in the prior month.
Rising demand for inputs, coupled with material shortages at vendors, caused a solid increase in supplier delivery times.
As a result, stocks of purchases fell at the quickest rate in 16 months.
Post-production inventories likewise decreased to the greatest extent since mid-2018 during October.
According to panel members, the fall was due to sales growth.
Largely due to real depreciation, against the US dollar, average cost burdens rose further at the start of the fourth quarter.
Moreover, the overall rate of inflation was at a fivemonth high and outpaced its long-run average.
To protect margins, Brazilian goods producers lifted their selling prices again.
The rate of charge inflation picked up to the strongest since June and was solid by historical standards.
Upbeat growth projections were sustained in October, with manufacturers expecting new business gains, stable economic conditions and the approval of favourable state policies to underpin production growth in the coming 12 months.
The level of positive sentiment remained elevated in the context of historical data, despite falling to a threemonth low. ■