Brazil industrial PMI points to stable overall business conditions in November

Business conditions across Brazil’s manufacturing industry were largely stable during November. Output levels were broadly unchanged, supported by further backlog depletion as new orders continued to fall slightly. However, data showed that job creation picked up fractionally and charge inflation accelerated to the fastest rate since April.

The headline seasonally adjusted HSBC Brazil Manufacturing Purchasing Managers’ Index registered 49.9 in November, close to the neutral threshold of 50.0 and up from 49.5 in October. The reading signaled that operating conditions in the industry were mostly unchanged during the latest survey period.

Following a modest fall in October, Brazilian manufacturing production was broadly unchanged in November. Reports indicated that weak market demand and new order levels were the primary factors constraining manufacturing activity. Data suggested that further backlog depletion was a factor supporting output levels.

Total new business received at Brazilian manufacturers continued to fall slightly in November. Data suggested that exports remained a key area of weakness. Respondents stated that lackluster demand and strong competition were behind lower new order volumes.

Reduced intakes of new work enabled Brazilian manufacturers to focus spare resources on the completion of existing contracts in November. Consequently, outstanding business continued to decrease, albeit to a lesser extent than over the previous three months.

Buying activity in the Brazilian manufacturing industry was cut again in November, reflecting another contraction in new orders. Panel members also mentioned efforts to minimize costs and that current stock levels were generally sufficient to meet demand. Both pre- and post-production holdings continued to be run down as a result.

In spite of weaker demand for inputs, Brazilian manufacturers noted another deterioration of vendor performance in November. Lead times lengthened for the 16th month in succession, albeit only slightly.

Brazilian manufacturers hired additional staff in November, primarily in anticipation of improved demand in the near future. However, job creation was only marginal.

Both input and output price inflation accelerated during the latest survey period, but remained moderate. The latter was the fastest for seven months and sharper than the rise in input costs for the first time in the series history. Companies attributed the increases to higher raw material prices.

Commenting on the Brazil Manufacturing PMI survey, Andre Loes, chief economist, Brazil at HSBC, said: “Conditions in the manufacturing sector were practically unchanged in November. The HSBC Brazil Manufacturing PMI is now at 49.9, from 49.5 in the previous month. The Output index picked up and returned to above 50. However, the strength of the labor market – with the employment index at or above 50 for fifteen consecutive months – may be translating into some inflationary pressures, as output prices are now going up at a faster pace than input prices.”