SAO PAULO, (Reuters) - Activity in Brazil’s limping manufacturing sector advanced the most in a year in January, although growth was minimal while inflation pressure mounted, a private survey showed on Monday.
The HSBC Purchasing Managers’ Index for the Brazilian manufacturing sector BRPMIM=ECI rose to a seasonally adjusted 50.7 in January from 50.2 in December. The 50 mark separates contraction from expansion.
The output index rose to its highest since Dec. 2013, mostly driven by consumer and intermediate goods. Capital goods, which tend to track companies’ outlook for future growth, contracted.
An index of Brazilian industrial confidence remains near historic lows as the nation’s economy faces a potential recession this year, weighed down by a drop in commodities prices and government fiscal tightening.
Despite the slowdown, input and output prices rose more quickly than in the previous month.
The cost pressure was “probably a result of the Brazilian real’s depreciation,” said Andre Loes, chief Brazil economist at HSBC.
Brazil’s currency BRBY has weakened against the dollar for five straight months, driving up the cost of imported goods and components.
High labor costs, poor infrastructure and a hefty tax burden still weigh heavily on Brazilian manufacturers, which have struggled to expand over the past four years.
Brazil’s industrial production likely contracted 2.5 percent in 2014, according to a central bank poll released this month.
Reporting by Asher Levine, Editing by Chizu Nomiyama