Brazil manufacturing output stable in Sept -PMI


SAO PAULO, Oct 1 (Reuters) - Brazil's manufacturing activityremained nearly stable in September as output recovered from twomonths of declines, though rising costs continued to drag on thecountry's lagging industrial sector, a closely watched surveyshowed on Tuesday.

The HSBC Purchasing Managers' Index for the Brazilianmanufacturing sector rose to a seasonally adjusted49.9 in September from 49.4 in August. However, it remainedbelow the 50 mark separating contraction from expansion for thethird straight month.

Brazil's manufacturers have limited a sustained turnaroundin the nation's sluggish economy as factories deal with highlabor costs, poor infrastructure and a hefty tax burden.

Output expanded for the first month in three, though onlyslightly, the survey said, with an increase in consumer andcapital goods production offsetting a decline in intermediategoods.

Total new orders shrank for the third straight month, withsome respondents citing economic instability, deterioratingclient confidence and increased competition from abroad.

Brazil's currency, the real, has weakened over 8percent against the U.S. dollar this year, though export orderscontinued to contract for the sixth straight month. Often aweaker currency helps boost exports by making locally producedproducts less expensive on the global market.

The weakening currency led to a sharp rise in input prices,however, which resulted in higher output prices, further sappingcompetitiveness. Seasonally adjusted input prices accelerated attheir fastest pace since October 2008 while output prices pickedup pace from the previous month, "reinforcing an upsideinflation risk," Andre Loes, chief Brazil economist at HSBC,wrote in the report.

Inflation in Brazil will remain stubbornly high well into2015 even as the economy struggles to gain steam, the centralbank said on Monday.

August's industrial output numbers are scheduled to bereleased by Brazil's government on Wednesday.

Output probably edged up slightly in August after a sharpdecline in the previous month, helped by stronger car and steelproduction, a Reuters poll showed on Monday.

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