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Brazil’s Manufacturing PMI Improved: Are Investors Optimistic?

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Brazil’s manufacturing PMI in February 2018

According to data provided by Markit Economics, the final Markit Brazil manufacturing PMI (purchasing managers’ index) improved strongly in February 2018. The metric stood at 53.2 in February as compared to 51.2 in January 2018. The February PMI beat the initial market estimate of 53 and was the seventh consecutive month of expansion in factory activity.

The stronger improvement in Brazil’s February manufacturing PMI was mostly due to the following factors:

  • Production output and volume rose at a faster rate in February 2018, and the factory output also rose in that month.
  • New business orders and export orders rose at a faster rate in the same month.
  • Job growth in the manufacturing sector also rose the most since March 2011.
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Performance of major ETFs in February

The iShares MSCI Brazil Capped ETF (EWZ), which tracks the performance of Brazil’s economy (FBZ), fell 2.4% in February 2018. The Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) fell 9.6% in the same month.

Although major Brazil-tracking ETFs dropped in February, the stronger domestic demand and business confidence helped economic activity. The manufacturers remained optimistic about the short-term economic outlook. Input inflation also fell to four-month lows in February. The steeper inflation has been a major concern for the economy in the past few years. The gradual decrease in inflation pressure is positive news for the economy.

In the next part of this series, we’ll analyze Brazil’s services PMI in February 2018.

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