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Why Brazil’s Manufacturing Activity Contracted in June

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Brazil Manufacturing PMI in June

According to data by Markit Economics, the final Markit Brazil Manufacturing PMI entered the contraction zone in June. It was 49.8 in June compared to 50.7 in May. June’s PMI didn’t beat the initial market estimate of 50.5. However, it was the first contraction in manufacturing activity since March 2017.

Contraction in the Brazil Manufacturing PMI in June was mostly due to the following factors:

  • Production output and volume declined significantly in June. It was the weakest since March 2017.
  • New business orders and export orders saw a softer rise in June.
  • Job growth in the manufacturing sector weakened in June.
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ETF performances in June

The iShares MSCI Brazil Capped ETF (EWZ), which tracks the performance of Brazil (FBZ), fell 10% in June. The Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) fell 26.8%.

Rising political uncertainty, higher inflationary pressure, and some internal issues for transporters in the manufacturing industry mainly weighed on the overall performance of the manufacturing industry. It led to delays in work and timely deliveries. In addition to these domestic factors, intensifying trade tensions also affected Brazil’s overall economic activity.

In the next part of this series, we’ll analyze the performance of the Brazil Services PMI in June.

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