BRASILIA, May 4 (Reuters) - Manufacturing activity in Brazil contracted in April at the fastest pace on record, a survey of purchasing managers’ activity showed on Monday, as the intensifying COVID-19 crisis brought the sector to a state of paralysis.
Factory closures, broken supply chains and plunging demand were among the main reasons for the collapse in activity, while a record fall in new orders also suggested that the outlook for the coming months is equally bleak.
In addition, employment in the sector shrank at its fastest rate in almost four years and the record low exchange rate continued to stoke inflationary pressures.
The IHS Markit headline Brazil manufacturing purchasing managers index (PMI) came in at 36.0, down from 48.4 in March, its lowest reading since it was launched in early 2006.
A reading above 50.0 marks expansion in the sector, while a reading below signifies contraction.
“The degree of optimism that there will be a quick recovery is deteriorating, with companies beginning to foresee a long and difficult road ahead,” said Andrew Harker, director at IHS Markit.
Brazil’s economy is expected to enter a deep recession this year, with the International Monetary Fund and World Bank penciling in a contraction of 5.0% or more.
Anything greater than a 4.25% decline in gross domestic product would be the biggest annual crash in at least half a century, according to central bank figures.
The IHS Markit survey also showed that business optimism across Brazilian industry fell to its lowest since March 2016, when the country was in the midst of one of its most severe recessions. (Reporting by Jamie McGeever; Editing by Daniel Wallis)