Brazilian manufacturing PMI continues to wallow in negative territory

Brazil's economic problems continue unabated, with a survey of purchasing managers in the manufacturing sector showed continuing declines in recent weeks, leading to worries that Latin America’s largest economy is some way from hitting rock bottom.

Markit's purchasing managers index of Brazil's manufacturing companies showed the sector's output continues to decline, although the PMI index improved slightly from November’s 80-month low of 43.8 to 45.6 in December.

With any PMI number below 50 indicating a contraction, this reading indicates Brazil is still well ensconced in a severe downturn.

In the third quarter, the country's GDP slid by a record 4.5% year-on-year, according to official figures, and a week before Christmas finance minister Joaquim Levy resigned, sparking fears that the country's ballooning budget deficit will deteriorate further.

In December, Markit said manufacturing output decreased for the eleventh consecutive month.

The surveyed purchasing managers blamed falling new business inflows and said Brazil's deeper economic retreat and falling purchasing power among consumers had led domestic demand to dwindle.

Over 2015, the Brazilian real has wilted badly, falling from a January high of 0.389 against the US dollar to its current level just under 0.25.

“Brazil’s manufacturing sector ended 2015 in familiar fashion, with sharp declines recorded for output, new orders and employment," said Pollyanna De Lima, economist at Markit.

She added: "Worryingly, it appears that the economy is yet to hit rock bottom, as the PMI averaged 44.5 in the final quarter of the year (Q3: 46.7).

"With the country bombarded with bad news, ranging from a depreciating currency, credit rating downgrades, political frictions, skyrocketing inflation, arrests following the Petrobras probe and a growing budget deficit, there is little to suggest any improvement in economic conditions in the near future, and 2016 looks set to be another year of great challenges.”