Brazil’s private sector activity fell at the fastest pace in more than six years during April, with weaker performance in both manufacturing and services sectors, survey results from Markit Economics showed Wednesday.
The headline seasonally adjusted HSBC Brazil Composite Output Index tumbled to 44.2 from 47 in March, marking its lowest reading since March 2009. A reading above 50 suggests contraction in the private sector.
The survey also showed that the Purchasing Managers’ Index for the services sector plunged to a 72-month low of 44.6 in April from 47.9 in March, amid declining new business and an increasingly fragile economy.
“April’s alarming PMI figures for Brazilian services simply add to the malaise encompassing the sector,” Markit economist Pollyanna De Lima said.
“Already-subdued demand is likely to come under additional pressure from a worsening labour market situation as firms cut payroll numbers further. Latest data generally suggest more challenging times ahead, with little prospect of a meaningful recovery over the coming quarter.”
Official data from the statistical office IBGE showed today that industrial production dropped 3.5 percent annually in March, a severe fall than the 3 percent drop predicted by economists. In February, output decreased 9.4 percent. Production declined for the thirteenth month in a row.
Month-on-month, industrial production dropped 0.8 percent in March, almost in line with economists’ expectation for a 0.7 percent decline.
The Markit survey showed that new work received by the Brazilian private sector fell the most in six years with manufacturing order levels dropping at a faster rate and bookings with service providers declining for a second successive month.
New orders for services declined the most since April 2009 largely due to strong inflation, tough economic conditions, truck strikes and weaker demand.
Consequently, private sector jobs were shed for a second successive month at the fastest pace since August 2012. Service providers also reduced staff at the sharpest rate in nearly three years.
Inflationary pressures rose further with input costs climbing at the quickest rate since November 2008. Services providers faced the sharpest input price inflation since November 2008. Higher costs were attributed to rising petrol prices, higher interest rates and a weaker currency.
Private sector firms raised output prices for the sixth month running and they passed on the additional cost burdens. Factory-gate inflation was the strongest since July 2008.
Despite the gloom surrounding the economic situation, Brazilian services firms remained optimistic that output will grow in 12 months’ time, the survey said. However, the Business Expectations Index logged the third-lowest reading in the history of the series during April.
The material has been provided by InstaForex Company – www.instaforex.com