Brazil's production sector contracts last month due to rising cost pressures, waning demand
(MENAFN) According to a report released by the US-based financial services company S&P Global on Monday, Brazil's production sector experienced contraction in August due to rising cost pressures and waning demand. The report indicates that South America's largest Economy saw its sharpest increase in input costs since March 2022. This surge in costs, coupled with decreased demand, contributed to a decline in production for the first time this year. Additionally, the growth in new orders slowed to its lowest point in eight months, signaling a broader slowdown in economic activity.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, noted that the Brazilian manufacturing sector faced a significant loss of momentum in August. The combination of escalating cost pressures and diminished new business opportunities has hindered the sector's performance. In response to these challenges, manufacturers have been compelled to reduce production levels and moderate their hiring practices to manage costs more effectively.
The S&P Global Brazil Manufacturing Purchasing Managers' Index (PMI) recorded a reading of 50.4 in August, down from 54.0 in July. This marks the lowest PMI reading of the year, reflecting a contraction in manufacturing activity. The index's decline underscores the growing difficulties faced by Brazilian manufacturers as they navigate the current economic environment.
Looking ahead, De Lima expressed hope for an improvement in the real exchange rate, which could alleviate some of the cost pressures and potentially spur a revival in growth. Manufacturers and economic analysts are closely watching for signs of stabilization in the exchange rate that might support the sector's recovery in the coming months.
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