RIO DE JANEIRO, BRAZIL – The pace of expansion in Brazil’s manufacturing sector slowed sharply in March, to its slowest since June last year, a survey of purchasing managers’ activity showed on Thursday, due to the COVID-19 pandemic resurgence and new lockdown restrictions.
The rampant second wave of the virus and its record numbers of new cases and fatalities triggered a decline in new orders, forcing companies to lower production, employment and their forecasts for the coming year, IHS Markit’s latest purchasing managers index (PMI) report showed.
The headline PMI fell to 52.8 in March from 58.4 in February.
A reading above 50.0 marks expansion, while a reading below signifies contraction. The series was launched in 2006.
“The sector experienced a setback in March, with new orders and output dipping back into contraction due to a spike in COVID-19 cases and the introduction of new controls aimed at curbing the spread of the disease,” said Pollyanna de Lima, economics associate director at IHS Markit.
“Concerns about the pandemic restricted business confidence, with firms at their least upbeat since May 2020,” she said.
In addition to the broad deterioration, supply-chain constraints underpinned a steep rise in input costs, forcing firms to raise prices in order to maintain margins, IHS Markit said.
IHS Markit’s employment index fell below 50.0 for the first time since June and the new orders index fell below the key threshold for the first time since May.
A growing number of economists say Brazil’s economy will shrink in the first quarter, dragged down by the second wave of COVID-19 and the end of emergency cash transfers to millions of poor people on December 31st.