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Brazil’s manufacturing index shows modest growth
January 3, 2014, 6:11 pm

The government announced it would increase minimum wage by more than 6 per cent [Getty Images]

The government announced it would increase minimum wage by more than 6 per cent [Getty Images]

HSBC’s Purchasing Managers’ Index survey released earlier this week has shown that manufacturing activity in Brazil has moved from contraction to expansion.

While only a small difference – from 49.7 in November to 50.5 in December, the positive change could allay the business sector’s worries about the stability of the Brazilian economy.

In mid-December, Brazilian Finance Minister Guido Mantega said that the global economic crisis weakened the recovery prospects for Brazil.

“This means that the Brazilian economy is growing with two crippled legs: on one hand, consumer finance, which is scarce, and on the other hand, the international crisis that robs us of a part of our growth potential,” he said.

But Mantega said that Brazil’s $370 billion in international reserves have equipped it with the means necessary to weather any market instability.

Brazil’s government may be under increased pressure to boost the economy, which appears to be tiptoeing its way to renewed growth.

The pace is too slow, experts say.

The Brazilian economy has suffered its largest quarterly slowdown in nearly five years, contracting 0.5 per cent from the previous quarter, according to government statistics agency IBGE.

However, public spending in the Latin American nation grew 1.2 per cent in the third quarter.

Exacerbating the situation is the fact that Brazil’s gross domestic product (GDP) registered the poorest third quarter results of any country in the G20 or BRICS economic bloc, the government said two weeks ago.

On December 24, Brazilian President Dilma Rousseff announced that her government would raise the minimum wage by 6.78 per cent to 724 reais ($310) per month in 2014.

The figure is less than the 9 per cent increase in 2013 and 14 per cent in 2012.

Rousseff’s recent efforts to strengthen the economy and provide public assistance to economic programmes has boosted her approval ratings after last summer’s nationwide street protests.

The data from the HSBC PMI Survey are likely to support her policies.

The survey on Thursday also showed that output expanded for the fourth straight month, and consumer goods registered an increase in new orders and output.

Source: Agencies

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