With the exception of Brazil, Purchasing Managers’ Indices (PMIs) in the manufacturing sector rose in leading developing economies and in Europe during October.
Some data from Britain and the emerging world betrayed the effects of inflation. In Brazil’s case, the PMI indicated a contraction in manufacturing after increased competition from imports, which are becoming more competitively priced as the Brazilian real strengthens against the dollar.
Any contraction in the sector for these reasons could fuel the dispute over currencies with America. (article continues below)
Brazil’s manufacturing PMI fell below 50, the minimum figure indicating expansion. This caused surprise because the labour market and solid expansion of credit have supported domestic demand.
External demand, on the other hand, is weakening. Competition is growing and the real has appreciated by 39% against the dollar since the start of the year.
Brazil is one of the first countries to have officially voiced concerns over its currency. The latest data is likely to aggravate the situation.
Last week, Brazilian officials reportedly criticised America’s decision to depress interest rates by buying billion of dollars of government bonds and warned that Brazil would fight for its interests.
Manufacturing PMI rose in Britain, the eurozone and Brazil’s fellow Bric countries – Russia, India and China – despite some countries’ currencies appreciating against the dollar.
The PMIs for the service industries rose in all Bric nations as well as in Britain, although the eurozone’s contracted. In Britain, both service and manufacturing PMI were helped by inflation, which enabled some companies to increase prices.
October was the first time in seven months that Britain’s manufacturing index rose, assisted by output rises in response to faster inflows of new businesses and a solid increase of new export orders.
The PMI is an indicator often used to assess the economic health of the manufacturing sector. It is based on five major indicators: new orders, inventory levels, production, supplier deliveries and labour markets.