November 5, 2019 / 1:03 PM / 17 days ago

Brazil PMIs show economy off to slower start in Q4

BRASILIA, Nov 5 (Reuters) - The pace of growth in Brazilian business activity slowed in October, a purchasing managers index survey showed on Tuesday, although strong upswings in employment and new export orders pointed to a potential rebound in the coming months.

Brazil’s service sector PMI fell to a four-month low of 51.2 in October, according to IHS Markit’s latest survey, and the composite PMI including services and manufacturing activity fell to a three-month low of 51.8.

A PMI reading above 50.0 denotes expansion in activity, and a reading below denotes contraction. Services accounts for more than 70% of all economic activity in Brazil.

These figures suggest Latin America’s largest economy got the fourth quarter off to a relatively slow start, but they did mark four straight months of expansion and there were clear pockets of strength that can offer cause for optimism.

“While there was only a mild improvement in service sector activity in October, the trends for new orders and employment were the most upbeat news from the latest PMI dataset,” said Pollyanna De Lima, principal economist at IHS Markit.

“Firms also welcomed the approval of the pension reform which, combined with expectations of a tax reform, led to an upward revision to growth projections,” she said.

The services employment index rose to 53.0, the highest since February 2015. The last time it was higher than that was June 2012.

The new business index rose to a seven-month high of 54.4, and new export orders rose for the first time since February, reaching 50.3, IHS Markit figures showed.

On a composite level, employment in October expanded at its strongest rate since February 2015. Official figures last week, however, showed unemployment in Brazil stuck at an elevated 11.8%, a sign of weak demand and excess slack in the economy.

With growth and inflation both weaker than the government would like, the central bank last week cut interest rates to a new record low of 5.00%. (Reporting by Jamie McGeever Editing by Chizu Nomiyama)

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