Brazil’s Composite PMI Falls Further Below GFC Lows by Eric Bush, CFA – Gavekal Capital Blog
Brazil’s composite GDP stands at just 38.3, 0.7 points below April’s level and 1 point below the financial crisis low in January 2009. The latest reading suggests that the severe recession that Brazil has been stuck in since 2014 is actually accelerating to the downside. Overall, real GDP has fallen over 10% since making a high in the third quarter of 2013.
If we dive a bit deeper into the composite PMI report it is difficult to find any silver linings. Backlogs of work index is crashing lower as it is not at the lowest level since March 2009.
Employment looks abysmal. The latest data point for the unemployment rate in Brazil is 8.2% for February 2016. The employment index has fallen a further since February. Brazil unemployment is undoubtedly well above 8.2% today.
Consumer prices have surged back near a year-over-year double-digit percentage rate while the manufacturing PPI is beginning to dramatically decline. The composite PMI suggests that higher consumer prices are here to stay and that manufacturing prices could fall to a 0% year-over-year growth rate. This will add further pressure to the manufacturing industry. The smallest of silver linings can be found in the new orders index. This index is 2 points higher than the February low. However, new orders are still contracting at a very fast pace as this index remains well below 50. Industrial production is set to continue to fall on a year-over-year basis.
