Reuters: US Dollar Report: Brazil industry shrinks at milder pace in August-PMI

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Brazil industry shrinks at milder pace in August-PMI Sep 3rd 2012, 13:00 Mon Sep 3, 2012 9:00am EDT * HSBC Brazil PMI at 49.3 in August from 48.7 in July * Fifth month of contraction, but at more modest pace * Export orders decline for 17th month in a row By Silvio Cascione SAO PAULO, Sept 3 (Reuters) - Brazil's manufacturing activity contracted for the fifth straight month, but the downturn eased its pace, suggesting a lagged reaction to a battery of government stimulus measures, a a private survey showed on Monday. The HSBC Purchasing Managers' Index (PMI) for the Brazilian manufacturing sector rose to 49.3 in August from 48.7 in July after seasonal adjustments. Despite the small gain, the second in a row, the index stood below the 50 mark that divides expansion from contraction in industry. The crisis in manufacturing has been putting the brakes on one of the world's leading emerging market economies. Brazil posted 0.4 percent growth in the second quarter compared with the first quarter, frustrating forecasts early this year for a sharper comeback. To shift manufacturing into a higher gear, the government has showered industry with tax breaks and chopped interest rates on long-term corporate loans. The central bank has also reduced its benchmark interest rate to an all-time low of 7.5 percent, a major step in a country where borrowing costs rose to as much as 26.5 percent nine years ago to curb inflation. While the stimulus program hasn't yet visibly boosted industrial output overall, aspects of the HSBC report showed signs that the industrial sector could be close to stabilizing. Manufacturing output and new orders declined at the mildest pace since March, both close to the 50 level dividing growth from contraction, according to the report. Highlighting the impact of the global economic slowdown, export orders declined for the 17th month in a row. Also, factories cut jobs for the fifth straight month. Input prices rose at the fastest pace in 16 months, accelerating an uninterrupted inflationary trend which began in September 2009, as transportation, food and steel costs advanced. Food prices have spiked in recent months after a severe drought in the United States. Output prices also climbed, with average selling prices advancing at the fastest rate in 16 months, the survey showed. Brazilian factories have long suffered with high taxes, lack of skilled workers and clogged roads and ports. The world's recent economic slowdown exposed their inability to compete against foreign competitors --who, from Europe to China, have also struggled to grow. The largest Latin American economy has relied on its vast consumer market and its still robust services sectors to avoid a recession in the past few quarters. Analysts expect the country to grow by less than 2 percent this year, its worst performance since 2009, but authorities expect it to grow more than twice as fast in 2013 as all stimulus measures take full effect. Brazil's statistics agency IBGE releases official industrial output data for July on Tuesday at 9 a.m. (1200 GMT). Link this Share this Digg this Email Reprints

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