September 1, 2015 / 2:33 PM / 2 years ago

Brazil manufacturing shrinks for seventh straight month - PMI

A view of the assembly floor inside Chery's first automobile assembly plant in Brazil, in Jacarei, August 28, 2014. REUTERS/Roosevelt Cassio

SAO PAULO, Sept 1 (Reuters) - - Brazil’s manufacturing activity contracted for a seventh straight month in August, a private survey showed on Tuesday, with a sharp drop in new orders driving heavy job cuts as economic recession takes hold.

The Purchasing Managers’ Index for the Brazilian manufacturing sector BRPMIM=ECI fell to a seasonally adjusted 45.8 in August from 47.2 in July. The 50 mark separates contraction from expansion.

Brazil’s economy shrank 1.9 percent in the second quarter from the previous three months, government data showed on Friday, sinking the economy into what is expected to be a deep and prolonged recession. Investment fell for the eighth straight quarter, while manufacturing dropped 3.7 percent.

Brazilian manufacturers have long struggled with high inflation, falling consumer confidence and rising interest rates. Industrial output is on track to drop 5.2 percent this year compared with 2014, according to a central bank poll of economists.

The pace of new orders at Brazilian manufacturers fell at the fastest rate in almost four years, Markit said, while staff levels fell at the quickest in over six years.

Meanwhile, inflation continues to hammer the manufacturing sector. Input prices spiked in the month, Markit said, though firms held back from passing along the entire cost increase to customers.

“Most of the rise in purchase prices was associated with the weaker currency,” Markit economist Pollyanna De Lima said.

Brazil's currency, the real BRBYBRL=, has weakened about 26 percent against the dollar this year, mostly due to economic recession, lower commodities prices, political turbulence and the outlook for higher interest rates in the United States.

Reporting by Asher Levine, Editing by Chizu Nomiyama

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