Brazil Manufacturing PMI deteriorates in November

After improving slightly in October (50.2), Brazil Manufacturing PMI deteriorated to 49.7, according to the seasonally adjusted HSBC Brazil Purchasing Managers’ Index (PMI).

HSBC described the latest contraction as “marginal”. However, it is the fourth one this year so far.

Brazilian manufacturing has struggled over recent years with high taxes, poor infrastructure and elevated labor costs.

Although factory output rose in November, for the third consecutive month, it was a much more moderate increase compared to October.

While growth in production was registered at consumer and intermediate goods companies, there was a sharp drop in new orders from capital goods firms, suggesting lower business confidence could be undermining investment plans.

Brazil manufacturing order books weak

Order books saw less business in November, amid weak demand conditions and competitive pressures. For the fifth month in a row the new orders index registered below the no-change threshold of 50.0. The steepest fall was seen at investment goods companies, while consumer goods saw new order growth; the only sub-sector to do so.

After contracting for seven consecutive months, new business from abroad remained unchanged in November. Companies reporting weaker overseas demand “generally commented on increased competition for new work and limited pricing power.”

Factories shedding jobs for the last eight months

Factories in Brazil shed jobs for an eighth straight month, with intermediate and capital goods producers seeing steep falls in employment. Consumer goods firms reported a stable job environment.

André Arantes Loes, Chief Economist, Brazil at HSBC said:

“The HSBC Brazil Manufacturing PMI fell to 49.7 in November, from 50.2 in October. After contracting at the margin for the entire third quarter, economic activity in Brazil’s manufacturing sector was unable to sustain October’s rebound and fell back below the 50 mark. Firms reported that output continued to climb, but at a slower pace than in October, while other key components such as new orders and employment all lost momentum.”

”The only good news was that the measures of inflation included in the PMI report also lost momentum: firms saw input prices rising at the slowest pace since June and output prices climbing at the weakest rate since May.”

Mexico’s PMI went the other way, rising to 51.9 in November from 50.2 in October.