Brazil’s Manufacturing PMI Sank Further In December, Tightening The Squeeze

Key Points

• PMI slid to 47.6 from 48.8, extending contraction below the 50 line.
• New orders fell faster and output weakened, while export declines eased a bit.
• Input costs dropped again, firms cut selling prices harder, and employment fell.

Brazil’s factories ended 2025 with a stronger contraction signal, and the details suggest a demand problem more than a seasonal dip.

The S&P Global Manufacturing PMI fell to 47.6 in December from 48.8 in November, moving further below the 50 mark that separates expansion from decline. All five subcomponents weighed on the reading, pointing to broad weakness.

Companies mostly blamed softer demand at home. New business contracted at a quicker pace in December, and that pulled production down at its fastest rate since September.

Foreign demand remained weak, but the fall in export sales moderated compared with November, offering only a small positive note.

Costs moved in a way that complicates the picture. Manufacturers reported a second straight monthly decline in input prices, citing cheaper energy, freight, metals, plastics, resins and some food-related inputs.

Brazil factories cut prices and jobs as demand stays weak

Yet firms continued cutting selling prices to chase orders. Prices charged fell for a fourth consecutive month and at the fastest pace since July 2023, a pattern that can signal margin pressure as firms compete for limited demand.

The labor market response was clear. A modest rise in employment in November was reversed in December, with companies cutting staff for the fourth time in seven months amid cost controls and idle capacity.

The report lands as policymakers try to balance cooling activity against inflation risk. Brazil’s central bank held the Selic rate at 15% in December and kept a cautious tone.

A prolonged factory slump can add weight to the case for cuts later, but it also raises the premium on stable public finances, predictable rules and productivity gains that encourage private investment.

Despite the weak end to the year, manufacturers still expect higher output in 2026 than current levels, citing hopes of better demand, lower borrowing costs, technology investment and efficiency efforts.

The near-term test is whether those expectations turn into orders before price-cutting and layoffs deepen.

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