Brazil Manufacturing Activity Lowest Since Sept. 2011

(RTTNews) - Brazil's factory downturn continued in August with activity levels reaching their lowest in nearly four years as orders plunged leading to steep job cuts, survey data from Markit Economics showed Tuesday.

The purchasing managers' index for the Brazilian manufacturing sector dropped to 45.8 from 47.2 in July. The score was the lowest since September 2011. A PMI reading below 50 suggests contraction in the sector.

New orders decreased for a seventh month in a row and the rate of decline worsened. Order book volumes contracted the most in nearly four years amid weak underlying demand in the face of an increasingly fragile economy. Foreign orders dropped marginally. Factories lowered their buying levels at the fastest rate in three months.

Jobs were shed at the steepest rate in over six years amid falling production requirements and tough economic conditions. In August, the statistical office IBGE had reported a 6.3 percent annual slump in industrial employment, which was the most severe since August 2009.

Input cost inflation climbed to a 22-month high as a weaker real led to higher prices paid for imports. Manufacturers passed on part of the burden to clients leading to further increase in output prices.

"The USD/BRL is approximately 30 percent higher than at the end of 2014, triggering Brazilian firms to pay more for imported inputs. The country has been suffering from major capital outflows, reflecting a toxic combination of deteriorating investor confidence, lower commodity prices and expectations of a rate hike in the US," Markit economist Pollyanna De Lima said.

The Brazilian economy contracted 1.9 percent sequentially, the fastest pace in six years, during the second quarter to enter a technical recession, preliminary figures from IBGE showed last week.