More Gloom For Brazil

More Room To Cheer For Mexico

July 2, 2014

Barron's - EM Daily Blog

Brazil reads like it is in an effective stagflation to me.

Manufacturing PMI was little changed in June, down to 48.7 from 48.8 in May, marking the third consecutive month that Brazil’s manufacturing sector posted a contraction. The new orders index, a forward-looking indicator, remained under 50, signaling contraction. Meanwhile, the price components of the PMI index rose. The output prices index increased from 49.3 to 51.5 in June.

Mexico, on the other hand, is on a much sunnier side. June manufacturing PMI was 51.8, a touch down from its reading of 51.9 in May.

“Business surveys from the US tend be a better predictor of manufacturing growth in Mexico (a virtue of close supply-chain linkages),” noted Edward Glossop at Capital Economics. ISM Manufacturing Index in the US reported a handsome 55.3 in June. Capital Economics expects Mexico’s manufacturing growth to accelerate to 5% over a year ago in the coming months.

The iShares MSCI Brazil Capped ETF (EWZ) gained 0.1%. The iShares MSCI Mexico Capped ETF (EWW) rose 0.3%.

Tags: brazil, investment, ishares, latam
Posted in LatAm, Consulting