* HSBC PMI rises for 3rd time in row to 49.8 in Sept
* Output grows as factories clear order backlog
* Employment drops, but at weaker pace than in prior months
By Silvio Cascione
SAO PAULO, Oct 1 Brazil's manufacturing sector
nearly broke out of its downturn in September, recording its
best month since March on strong output and a slower pace of
layoffs, a private survey showed on Monday.
At 49.8 in September, the HSBC Purchasing Managers' Index
for the Brazilian manufacturing sector was still
short of the 50 mark that divides contraction and expansion.
However, it was the third straight month the number has moved
higher, suggesting the downturn in manufacturing activity is
becoming less pronounced.
The HSBC PMI survey is comprised of 11 components. One of
them, manufacturing output, showed production expanded in
September as factories shrugged off weak demand to focus on
launching new products.
That suggested business confidence is growing after more
than a year of aggressive stimulus measures by President Dilma
"The PMI survey reinforces perceptions that Brazil's
manufacturing sector experienced a modest rebound at the end of
the third quarter and supports the improvement of sentiment
regarding the economic outlook for the fourth quarter of 2012,"
said Andre Loes, HSBC's chief economist for Brazil.
Another survey released last week by the Getulio Vargas
Foundation, a local think tank, revealed confidence among
Brazilian industrialists jumped in September to its highest
level since July 2011.
On top of plans to launch new products, factories boosted
output by depleting their order backlogs, said Markit Economics,
who compiled the data for HSBC.
Brazilian factories have been hit hard by the current global
slowdown, which has reduced demand for goods. Official data
released on Monday showed that Brazil's trade surplus narrowed
for the sixth straight month in September as exports continued
Saddled with onerous taxes, a strong currency and a
dwindling pool of skilled labor, Brazilian manufacturers have
found it difficult to compete with lower-cost producers
But some recent indicators suggest that a tentative recovery
Brazil's industrial output rose in July for the
second straight month, surpassing market expectations, according
to government data. Brazil's statistics agency IBGE will release
industrial data for August on Tuesday.
Automobile output jumped 10.6 percent in August versus July,
according to the national carmakers' association Anfavea.
To support the recovery, the central bank has cut its
benchmark interest rate to a record low of 7.5 percent -- a far
cry from over 26 percent just nine years ago. Rousseff has also
offered a string of tax breaks and credit incentives to help
revive Brazil's flagging industry.
"The pick-up in September's manufacturing PMI adds to recent
evidence suggesting that policy stimulus is starting to take
effect in Brazil," wrote Neil Shearing, chief emerging markets
economist at Capital Economics.
"We suspect that the turnaround in the real economy will
ultimately be more lackluster than most now expect, but even so
it seems likely that the central bank will call an end to
monetary easing and keep interest rates on hold this month."
The HSBC survey showed factories cut payroll jobs for the
sixth month in a row, reflecting weak demand, but layoffs came
at a slower pace than in the prior three months.
Manufacturers' input costs rose, as higher steel and raw
material prices pushed inflation to its fastest since June 2011.