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Brazil manufacturing sector extends soft growth in Jan. -PMI
February 3, 2014 / 12:05 PM / 4 years ago

Brazil manufacturing sector extends soft growth in Jan. -PMI

* HSBC Brazil Manufacturing PMI rises to 50.8 from 50.5

* New orders rebound, output growth slows

By Asher Levine

SAO PAULO, Feb 3 (Reuters) - Brazil’s manufacturing activity expanded slightly for the second straight month in January as new orders increased at the fastest pace in almost a year, a private survey showed on Monday.

The HSBC Purchasing Managers’ Index for the Brazilian manufacturing sector rose to a seasonally adjusted 50.8 in January from 50.5 in December. The 50 mark separates contraction from expansion.

New orders jumped to 52.4 from 50.7 in the previous month, marking the fastest rate of expansion since February 2013 as businesses reported strengthening demand.

Output expanded for the fifth straight month, the survey showed, though at the slowest pace since September. Consumer goods posted an improvement in new orders, output, employment and export business. In the capital goods segment, however, business conditions continued to decline.

High labor costs, poor infrastructure and a hefty tax burden still weigh heavily on Brazil’s manufacturers, whose lackluster performance has dragged on the nation’s economic growth.

January’s weak output growth was “more than offset by a stronger increase in new orders,” said Andre Loes, chief Brazil economist at HSBC. “On the inflation front, there was mixed news.”

Prices for manufacturing inputs such as raw materials expanded at the fastest pace in three months. Some respondents cited fluctuations in Brazil’s currency, the real, which weakened about 2.5 percent against the dollar in January alone.

A fierce competitive environment caused manufacturers to avoid passing higher prices on to customers, however, leading to the slowest rate of output price expansion since July 2012.

The weaker currency, which should boost exports by making locally made products less expensive in the global market, had no such effect as new export orders remained nearly stagnant.

Employment at capital and intermediate goods producers fell for a 10th straight month as survey respondents reported tougher economic conditions and a lack of qualified labor. In contrast, consumer goods makers expanded payrolls in January.

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