Brazil manufacturing recovery slows to a crawl in April -PMI

Thu May 2, 2013 9:00am EDT

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By Asher Levine

SAO PAULO, May 2 (Reuters) - Brazil's manufacturing output just barely expanded in April, a survey showed on Thursday, suggesting a recovery in the country's beleaguered industrial sector remains fragile.

The HSBC Purchasing Managers' Index for the Brazilian manufacturing sector fell to a seasonally adjusted 50.8 in April, from 51.8 in March. Still, the index stood above the 50 mark that divides expansion from contraction, where it has remained since October.

Total new orders rose for the seventh straight month, though at the slowest rate since October, while new export orders fell slightly due to weak demand from key export markets.

Input prices rose amid evidence of higher steel, fuel, plastic and raw material prices, though companies did not fully pass on those increases to customers due to strong competition for new work, the survey said.

The data suggest Brazilian industry is barely hanging onto a recovery following a three-year period of mediocre growth due to weak global demand and structural challenges such as low productivity, high taxes, infrastructure bottlenecks and a tight labor market.

Brazilian industrial output shrank more than expected in February, reversing most of the previous month's gains and casting fresh doubts over the health of the sector.

A 2.7 percent drop in output last year contributed to a mediocre 0.9 percent growth rate for the economy as a whole, though analysts expect a slight improvement in the first quarter this year.

"After a strong January, economic activity lost momentum over the remainder of the quarter," said Andre Loes, chief Brazil economist at HSBC. "This is yet another sign that the recovery of 2013 is quite modest."

A weekly central bank poll of analysts published on Monday showed the economy is expected to grow 3.0 percent in 2013.

March's industrial output data is expected to be released on Friday. Analysts expect output to have risen from the previous month on a jump in automobile production, reversing most of February's decline and supporting hopes that a gradual recovery will continue to take place over the year.

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