Brazil’s private sector activity kept plunging at the end of last year, as demand shrunk amid the deteriorating economic situation, the purchasing managers’ survey data from Markit Economics showed Wednesday.
The composite output index dropped to 43.9 from 44.5 in November. A PMI score below 50 indicates contraction in activity. The severe downturn in manufacturing production eased slightly, but services activity declined at a quicker pace.
The services business activity index fell to 43.5 in December from an eight-month high of 45.5 in November. The decline in new business and activity was the attributed to worsening economic conditions.
“Brazil’s economy remained in a free-fall mode in the last month of 2015, driven by a sharper downturn in services activity. Also of concern, the labor market continued to nosedive, as companies operate in what’s considered the worst economic situation since the great depression,” Markit Economist Pollyanna De Lima said.
“As economic policies are unlikely to be part of the government’s agenda in the near-term, the prospects for any improvement in coming months remain clouded.”
All six sub-sectors of the services sectors posted declines in activity with the quickest rates seen in ‘Other Services’, Renting & Business Activities and Post & Telecommunication.
Employment decreased sharply at manufacturing and services firms, where jobs were shed at a record pace due to continued decline in new business and cost-cutting initiatives.
Input costs for services firms rose on the back of higher tax rates and the weaker Brazilian real. Meanwhile, lower commodity prices reduced cost burdens for manufacturers.
Services firms passed on their higher costs to clients leading to further acceleration in inflation, which was above the long term average. In contrast, charge inflation eased for manufacturers, though it remained above the long-run average.
Despite the gloom, service providers’ confidence improved in December, with almost 27 percent of the respondents expecting activity to expand over the course of the next year, largely on the hopes of an economic recovery.
The material has been provided by InstaForex Company – www.instaforex.com