Brazil Factory PMI Lowest Since September 2011

(RTTNews) - Brazil manufacturing activity continued to fall in March to its lowest level in three-and-a-half years, as new business and production declined sharply, leading to further reduction in employment, survey figures from Markit Economics revealed Wednesday.

The HSBC Brazil Purchasing Managers' Index tumbled to 46.2 from 49.6 in February with declines witnessed in all the five sub-components and all the three sub-sectors. A PMI reading below 50 suggests contraction in the sector and the latest score was the worst since September 2011.

"Lamentably, there is little to suggest that we can expect any growth in the sector in the near-term," Pollyanna De Lima, economist at Markit, said.

Industrial production declined less-than-expected in February, official data released by the statistical office IBGE revealed earlier on Wednesday. Production fell 0.9 percent from January, when it rose a 0.3 percent, which was sharply revised down from 2 percent estimated earlier.

Economists had expected a 1.6 percent fall for February. The January gain had come after two months of decline in a row.

On a year-on-year basis, industrial production plummeted 9.1 percent in February, which was the biggest fall since July 2009, when it fell 10 percent. It was also the twelfth consecutive drop in production. Economists had expected a 10.1 percent decrease.

The Markit survey showed that production decline was the worst in 42 months in March with panelists reporting falling demand and difficult economic conditions. New orders decreased the most since October 2011. Export demand stagnated amid reports of challenging global competitiveness in the face of robust cost rises.

Input costs rose for a fifth straight month, albeit the weakest since last December. The latest increase was largely due to the depreciation of the Brazilian real against the US dollar leading to higher import costs.

Factory-gate inflation accelerated to a 16-month high in March as manufacturers passed on to clients part of the additional cost burdens. However, the rate of output price inflation has remained below that for costs in each of the past four months.

Employment declined for the first time since last November. Jobs were reduced at a solid rate, which was the quickest in 32 months. Firms mostly attributed the job cuts to cost-reduction attempts.

Purchasing activity also fell the most since October 2011, owing mainly to inflated prices and reduced production needs.