Brazil’s manufacturing expands healthily again in September on stronger demand

SAO PAULO (ICIS)–Brazil’s manufacturing sectors posted a significant improvement in September on the back of an increase in production, stronger job creation, and accelerated sales growth, analysts at S&P Global said on Tuesday.

The capital goods sub-sector, which had been a weak point in August, emerged as the best performer in terms of sales and output growth in September.

Brazil manufacturing	September	August	July	June	May	April	March	February	January	December 2023	November	October
PMI index	53.2	50.4	54.0	52.5	52.1	55.9	53.6	54.1	52.8	48.4	49.4	48.6

Source: S&P Global

Manufacturing jobs expanded markedly, fueled by tech investment, demand resilience, and an increased need for skilled workers, and the pace of job creation was quicker than in August.

Additionally, firms increased their input purchases, extending the current expansion streak to nine months.

However, the sector faced some challenges. Supplier pressures escalated, with lead times lengthening to the greatest extent in over two years. This was attributed to slow international logistics, congestion at Asian ports, and shortages of key inputs among distributors.

Price pressures remained historically high, with both input costs and output charges rising at one of the fastest rates seen in over two years. The increase in input costs was linked to currency depreciation, rising transportation costs, and demand exceeding supply.

Despite these pressures, manufacturers maintained a positive outlook. About 62% of surveyed firms expressed optimism about output growth in the coming year, although overall sentiment slipped to a six-month low.

International demand provided some support, with new export orders rising marginally. Companies reported gains from various regions including Africa, Asia, Latin America and Europe.

While the September data was encouraging, it is worth noting that the average PMI reading for the third quarter was the lowest in 2024 so far, indicating some volatility in the sector’s performance.

Overall, the report paints a picture of a manufacturing sector that is growing and creating jobs, but also grappling with supply chain issues and inflationary pressures.

“A significant factor in this resurgence was a marked improvement in sales, particularly within the capital goods sector which had previously shown weakness,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.