Brazil Manufacturing Improves but Remains in Contraction

The S&P Global Brazil Manufacturing PMI fell to 47.0 in January 2026 from 47.6 in the previous month, marking the weakest conditions in four months. Weaker demand led to another fall in new orders, including lower foreign sales. Intermediate and investment goods producers saw sharp contractions, while consumer goods declined only marginally. Capital goods was the only segment to report growth in new export orders. Lower order inflows prompted a sharp cut in output, the second-steepest in over three and a half years. Purchasing activity declined, while factory employment fell for a second month. Input costs rose for the first time in three months, reflecting higher prices for foodstuffs, commodities, electronic components, metals and plastics. Output prices edged up slightly. Stocks of inputs and finished goods fell again. Business confidence improved to its highest level since June 2025, supported by expectations of interest rate cuts, stronger demand and investment plans.

The S&P Global Brazil Manufacturing PMI fell to 47.6 in December 2025 from 48.8 in November, marking the sharpest deterioration since September. New business declined at one of the fastest rates in two-and-a-half years, leading to a solid contraction in factory output, the steepest since last September. Weaker demand prompted firms to cut input purchases for a ninth consecutive month, with the drop the largest since April 2023. Input costs fell for a second straight month, while output prices declined for the fourth consecutive month at the fastest pace since July 2023, reflecting discounting, cost savings, and efforts to boost sales. Employment fell after a brief increase in November, with payrolls reduced for the fourth time in seven months. Despite current weakness, manufacturers expect output to rise in 2026, supported by hopes of stronger demand, lower interest rates, technological investment, and productivity gains.

The S&P Global Brazil Manufacturing PMI rose to 48.8 in November 2025 from 48.2 in October, signaling a moderate contraction and the slowest since May. The small improvement reflected renewed growth in employment and stocks of purchases. On the other hand, new orders fell at a faster pace amid weak domestic and external demand. Ongoing drops in new work drove a seventh straight fall in output. Also, softer demand and competition, alongside lower input costs, led to another reduction in output prices, the sharpest since August 2023. Input costs declined for the second time in over two years, a marginal decrease but a clear contrast to the heavy pressures seen in early 2025. Meanwhile, business confidence improved as companies hope for a resolution to the tariffs imposed by the US.