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What Boosted Brazil’s Service Activity in January

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Brazil’s service activity in January 2018

According to Markit Economics, Brazil’s service PMI (purchasing managers’ index) rose strongly between December 2017 and January 2018, to 50.0 from 47.4, seeing expansion after three consecutive months of contraction. A reading above 50.0 indicates expansion in economic activity.

January’s service PMI figure was the highest since October 2017. Brazil’s (EWZ) service PMI was affected by the following factors:

  • production volume and output improved at a faster rate
  • new business and export orders rose strongly
  • employment in the service sector fell
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Falling employment, as well as higher inflation and political instability, have been major concerns for the economy over the past few years. However, consumer demand has been improving gradually, the outlook for demand is positive, and the political situation seems to be stabilizing, improving investor confidence.

Market impact

Previously, we saw that the iShares MSCI Brazil Capped ETF (EWZ) and the Direxion Daily MSCI Brazil Bull 3X ETF (BRZU), which track Brazil’s economy, rose strongly in January 2018. The First Trust Brazil AlphaDEX ETF (FBZ) rose 11.3%. In the next part of this series, we’ll analyze China’s manufacturing PMI in January 2018.

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