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Does Brazil’s Services PMI Indicate Improvement in Its Economy?

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Brazil’s services PMI in December

According to a report by Markit Economics, the final Brazil services PMI (purchasing managers’ index) remained in the contraction zone in December 2017. This metric stood at 47.4 in December compared to 46.9 in November 2017. A reading below 50.0 indicates a contraction in economic activity.

Brazil’s services PMI has remained in the contraction zone for the past three months. The December services PMI was the country’s weakest reading in the last six months. Brazil’s (EWZ) services PMI in December was mostly due to the following factors:

  • Production volume and output declined in December 2017.
  • New business orders and export orders declined sharply in December.
  • Employment growth in the services sector declined in December.
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Economic impact

In the previous article, we noted that Brazil’s (FBZ) equity market and major ETFs showed strong performance metrics in December 2017. This rally was mostly driven by the strong market rally in major emerging nations (EEM). However, the Brazilian economy is still under pressure.

Political instability and lower demand subdued overall demand in the Brazilian economy as well as its economic activity. Although the confidence of the various service providers improved marginally, overseas demand remained weaker during the month.

In the final part of this series, we’ll analyze the indicators that investors should watch this week.

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