Rising cost pressures, fading demand cause output contraction in Brazil: Report

By Ovunc Kutlu

ISTANBUL (AA) - Rising cost pressures and fading demand cause contraction in Brazil's production, according to a report released by the US-based financial services company S&P Global on Monday.

South America's biggest economy saw in August the sharpest increase in input costs since March 2022, according to the report.

While production declined last month for first time this year so far, new order growth slowed to its lowest level in eight months, it added.

"The Brazilian manufacturing sector suffered a loss of momentum in August, with surging cost pressures hampering firms' ability to secure new business," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

"Manufacturers even took the step of scaling back production and softened the pace of hiring in a bid to limit costs," she added.

The S&P Global Brazil Manufacturing Purchasing Managers’ Index (PMI) came in at 50.4 in August, falling from 54.0 in July, and recording its lowest reading this year.

"Firms will be hoping for an improvement in the real exchange rate soon to help relieve some of the pressure on costs and lead to a revitalisation of growth in the months ahead," said De Lima.