According to the Purchasing Managers’ Index (PMI) survey, growth in Brazilian industrial activity hit a nearly two-year high in February as a substantial improvement in demand boosted production.
S&P Global data released this Friday shows Brazil’s industrial PMI rose to 54.1 in February, from 52.8 in January, reaching its highest level in 20 months. The 50 mark separates growth from contraction.
“February PMI data brought positive news on the Brazilian industry situation. Building on January’s momentum, there were stronger increases in orders and production, which is a good sign for the fourth quarter performance so far” , assessed in the notes the associate director of economics at S&P Global Market Intelligence, Pollyanna De Lima.
According to the survey, Brazilian industries recorded their second consecutive improvement in new job arrivals in February, at the strongest pace since July 2021, although international sales fell again.
“The data showed that strong corporate sales were driven by improving domestic demand while export orders fell at a stronger pace. Most of the deterioration in international sales occurred in South America, although respondents they also noticed weakness in Europe, Japan and the U.S.,” De Lima said.
Given this, manufacturers increased production volumes, which reached the highest level in more than two and a half years, with machinery acquisitions and attempts to replenish inventories.
As a result, the sector sought to increase capacity by hiring employees on a permanent basis in February, with employment reaching its highest level in more than a year and a half.
Purchase costs accelerated in February, but top-line inflation still remained below the long-term average. While some companies cited rising prices for chemicals, electronics, food and commodities, others reported reductions in agricultural products, fuels, natural gas and steel.
Some companies have chosen to pass on part of the costs to customers, resulting in an increase in prices charged, albeit moderate.
One factor that helped contain input inflation was the lack of pressure on supply chains, with input lead times increasing only slightly. According to the survey, companies reporting delays cited slow international shipments, shortages of raw materials and blocked imports.
Regarding the outlook for the next 12 months, Brazilian manufacturers were optimistic given subdued inflation and falling interest rates, also citing new product launches and favorable demand expectations.
After five consecutive cuts of half a percentage point by the Central Bank, the Selic rate is currently at 11.25%, a level that is still high and restrictive for economic activity. The CB has indicated that it will maintain the pace of monetary easing for future meetings, while keeping in mind that interest rates are expected to remain at a restrictive level.
Source: Terra
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