American industry accelerated but Brazilian industry dropped in March

RIO DE JANEIRO, BRAZIL – Data on industry in Brazil and the U.S. released on Thursday, April 1st by consultancy IHS Markit, show that the countries’ economies took opposite paths in March. According to the institution, Manufacturing PMI in Brazil fell to 52.8, the lowest level in nine months, compared to 58.4 in February.

In the United States, in turn, Manufacturing PMI presented the second-highest since the beginning of the historical series in 2007. In March, the index stood at 59.1, against 58.6 in February. There, the population’s wide vaccination encouraged increased consumption, and the number of orders to industry was the highest since 2014.

In Brazil, the drop was caused by the high number of infections by the new coronavirus, which led to tightening social distancing measures in several Brazilian cities. “Concerns about the pandemic limited business confidence and companies indicated the lowest level of optimism since May 2020,” says Pollyanna De Lima, Associate Director of Economics at IHS Markit.

This Brazilian sector was also affected by the shortage of raw materials and transportation restrictions, which affected the supply chain and caused unprecedented delays in delivery times. Also, raw material costs rose significantly in the month. To prevent too great an impact on their profit margins, companies cut jobs and passed the increase on product prices.

“The employment index fell for the first time since the mid-2020s, while prices rose at one of the steepest rates since the survey began in early 2006,” says Pollyanna.

This same problem has hit industry in the United States. There was inflationary pressure due to the fastest cost increase in a decade, leading to a partial pass-through of customers’ prices. Despite high domestic demand and increased export orders, there was no significant increase in production due to supply shortages and delivery delays.

“Supply chain delays and backlogs of incomplete orders are growing at unprecedented rates in the fourteen-year history of the survey, which means that finished goods inventories are falling at a steep rate,” says Chris Williamson, Chief Business Economist at IHS Markit.

The increase in U.S. purchases was influenced by the population receiving checks after the passage of President Biden’s $1.9 trillion packages. Now the concern for economists is whether the increase in purchasing power will put further pressure on inflation.

“With business expectations becoming even more optimistic in March, strong output growth seems likely in the second quarter, but the big question will be whether, with the increase, price pressures also become more entrenched,” says Williamson.

Source: Veja

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error