Brazil's manufacturing sector witnessed a slight acceleration in growth during June, despite facing significant economic hurdles and increased cost pressures resulting from the depreciation of its currency, according to data released by S&P Global on Monday.
The Purchasing Managers' Index (PMI) for the manufacturing sector climbed to 52.5 in June from 52.1 in May. A PMI reading above 50 signifies expansion in the sector.
The survey indicated that a notable worsening in suppliers' delivery times, which are factored inversely into the PMI calculation, also contributed positively to the overall index.
Manufacturing output saw moderate growth in June, marking an improvement from the stagnation observed due to flooding in May. However, overall progress was hampered by currency depreciation, political instability, and challenging economic conditions.
New orders experienced a marginal upturn, constrained by the Brazilian real's depreciation against the US dollar and the postponement of orders from agricultural clients.
A significant concern for Brazilian manufacturers was the surge in input costs across various commodities, such as coffee, cotton, dairy products, fabrics, oil, pulp, rice, steel, wheat, and zinc. The inflation rate surged to its highest in nearly two years.
These increased costs compelled firms to hike their selling prices to the greatest extent since mid-2022.
Supplier deliveries faced considerable delays in June due to floods in the Southern State of Rio Grande do Sul, customs barriers, and material shortages among distributors.
Employment in the manufacturing sector continued to rise in June, particularly in the technology departments. The pace of job creation, although marked, slowed to a three-month low.
"Business confidence also improved in June, potentially supporting investment and overall economic growth in the upcoming months," remarked Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
