Brazil manufacturing PMI falls to 50.2 in December from 52.9 in November: IHS Markit

[January 02, 2020]    BRASILIA (Reuters) - Growth in Brazil's manufacturing sector almost completely evaporated in December, a survey of purchasing managers' activity showed on Thursday, as employment shrank and new export orders slumped to their lowest in over a decade.

The IHS Markit Brazil manufacturing purchasing managers index (PMI) came in at 50.2, a sharp drop from 52.9 in November and the slowest pace of expansion since July, almost to the point of stagnation.

A reading above 50.0 marks expansion in the sector, while a reading below signifies contraction.

"The disappointing readings in December acted to partially cancel out strong gains in October and November, with the performance of the sector over the final quarter of 2019 broadly in line with that noted in the third quarter," said Pollyanna De Lima, principal economist at IHS Markit.

"This indicates that the sector has only made a marginal contribution to economic growth in Q4," she added.

Brazil's economy expanded by a stronger-than-forecast 0.6% in the third quarter, fueling hopes that the economy has turned a corner and led many economists to raise their outlook for 2020.

These manufacturing sector figures, however, could temper some of that optimism.

The sector shed jobs in December for the first time since July, as the employment index fell to 49.3 from 50.5 the month before, while the new export orders index slumped to 40.1, the lowest since April 2009.

Demand from many of Brazil's neighbors in Latin America has been affected by economic and political turmoil in recent months, most visibly in the collapse of auto sales to Argentina.

With wider growth continuing to pick up and interest rates at their lowest on record, manufacturers' overall outlook improved, with the future output index climbing to 88.4, the highest since January.

"Manufacturers were at their most upbeat in just under a year, with production growth expected to be boosted by higher sales, investment, marketing initiatives and better economic conditions," De Lima said.

(Reporting by Jamie McGeever; Editing by Chizu Nomiyama)

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