Bonds News

Brazil services PMI ticks up, but wider growth in activity slowest in 6 months - IHS Markit

BRASILIA, Jan 6 (Reuters) - Brazilian economic activity in December grew at its slowest pace in six months, a purchasing managers survey showed on Monday, as a slight improvement in the services sector failed to compensate for a more disappointing performance in manufacturing.

The IHS Markit Brazil services purchasing managers index (PMI) came in at 51.0, up marginally from 50.9 in November, while the composite PMI fell to 50.9, the lowest since June, from 51.8.

This follows the manufacturing PMI released on Jan. 2 which showed a sharp drop to 50.2 as employment shrank and new export orders slumped to their lowest in over a decade.

A reading above 50.0 marks expansion in activity, while a reading below signifies contraction.

Taken together, the PMI figures for December and the final quarter suggest the pace of growth in Latin America’s largest economy slowed going into the end of the year after having picked up in the third quarter.

“Looking at the combined results from the manufacturing and services PMI surveys, the rise in private sector output noted in the final quarter of the year was a tick lower than that seen in Q3,” said Pollyanna De Lima, principal economist at IHS Markit.

“This suggests that GDP growth will be somewhat disappointing, and is likely to be below the 0.6% reported for the three months to September.”

Once again, the labor market was a weak spot. The services employment index slipped to a five-month low of 50.3, signaling barely any job growth, while at 50.0, the composite employment index showed absolutely no growth in head count.

The outlook for services was brighter, however, as the business expectations index rose to a five-month high of 79.7 and the new export business index climbed to a 13-month high of 50.9, IHS Markit said.

Brazil’s economy, dominated by services, is expected to grow by more than 2% this year, according to official and private sector forecasts, boosted by strengthening domestic demand and the lowest interest rates on record, analysts say.

Inflationary pressures in the services sector appeared to pick up in December, with the input prices index rising above 60.0 for the first time since October 2018, IHS Markit said. (Reporting by Jamie McGeever Editing by Chizu Nomiyama)