July 1, 2019 / 1:44 PM / 4 months ago

UPDATE 1-Brazil manufacturing sector avoids contraction in June as PMI rebounds

(Adds detail, context, comment)

By Jamie McGeever

BRASILIA, July 1 (Reuters) - Brazil’s manufacturing sector ended the second quarter on a stronger footing, avoiding slipping into contraction territory in June and breaking a three-month run of slowing growth, a survey of purchasing managers’ activity on Monday showed.

The IHS Markit Brazil manufacturing purchasing managers index (PMI) rose to 51.0 in June from a 10-month low of 50.2 in May, having steadily declined for three months in a row to the point of stagnation and brink of contraction.

A reading above 50.0 marks expansion in the sector, while a reading below signifies contraction, and the figures are one of the first snapshots of economic activity for June, the final month of the second quarter.

While some of the underlying data reflected continued weakness in the sector, such as a sharp fall in exports and more job cuts, the headline number might cool some of the talk of recession that has built up Amid a string of subpar economic indicators for April and May.

“There was a mild improvement in growth of Brazilian manufacturing output during June, after a considerable slowdown in May,” said Pollyanna De Lima, principal economist at IHS Markit, adding that the data will likely bring “some relief to policymakers.”

The headline PMI index’s rise to 51.0 from 50.2 marked the strongest month-on-month rebound since November. Still, the latest three-month average was the lowest since the third quarter of 2018, His Markit noted.

Exports contracted at their fastest pace in 2-1/2 years, IHS Markit said, while companies cut headcount for the second month in a row.

Earlier on Monday, a central bank survey of economists showed that Brazilian economic growth forecasts for this year were cut for the 18th consecutive week, but by such a tiny extent to suggest forecasts might be close to bottoming out. (Reporting by Jamie McGeever; editing by Jonathan Oatis)

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