BRAZIL

BRAZIL

The manufacturing PMI survey continued to decline, sliding to 49.0 in June from 50.8 in May, after a recent peak of 54.6 in February, and falling below the 50.0 mark for the first time since late last year. However, the correlation between the PMI and actual industrial production does not look particularly strong on a high frequency basis. Elsewhere, the services PMI declined to 52.1 in June from 53.3 in May, still above the 50.0 threashold and also above the manufacturing PMI. The gap between services and industry can also be seen in retail sales versus industrial production, which at least in part probably reflects the damage that a strong currency can do to local industry's trade competitiveness. By contrast, today's FGV survey on business sentiment in the services sector in June should prove fairly buoyant.

On activity today, watch automobile production data for June. Overall industrial production (IP) rebounded in May, unwinding the decline in April, and leaving IP essentially flat on average so far in Q2, after a smart recovery in Q1. Car production data today should give some preliminary, partial color on industrial activity in June. Elsewhere, the CNI nationwide survey on industrial capacity utilization should bring a relatively stable print for May, compared to the 82.0% mark in April.