Brazil’s manufacturing activity in November
According to data provided by Markit Economics, Brazil’s manufacturing PMI (purchasing managers’ index) rose to 53.5 in November from 51.2 in October, beating the estimate of 52.5 and marking the strongest rise in five years.
November’s improvement in manufacturing activity was mainly due to the following factors:
- production output and volume rose at the fastest rate since January 2013
- new business orders and export orders improved, with new business orders reaching a seven-year high
- job growth in the manufacturing sector improved
Performance of major ETFs in November
The iShares MSCI Brazil Capped ETF (EWZ), which tracks the performance of Brazil’s economy (FBZ), fell nearly 3.6% in November 2017. The Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) fell nearly 12.8%.
The Brazilian economy’s higher inflation is a major concern for the country. Its central bank has been gradually reducing its key interest rate since October 2016. On December 6, 2017, the interest rate was reduced to 7%, diverging from developed markets such as the United States (SPY) (QQQ) and the United Kingdom (EWU), which are raising their rates.
Many market participants expect that rate cuts will be positive for equity markets and the economy, boosting economic and manufacturing activity. In the next part of this series, we’ll analyze Brazil’s service PMI in November 2017.