Letter IEDI n. 1105—Industry back to 2021 pattern
The second half of this year began with the industry returning to the pattern of negative results that has marked its performance in 2021. After eliminating seasonal effects, industrial output dropped 1.3% from Jun'21 to Jul'21.
A set of factors interrupted the sector's trajectory of recovery this year, such as the worsening of the pandemic and the delay in vaccination, the end or weakening of emergency measures, bottlenecks in production chains and, on the demand side, unemployment at record levels and inflationary pressures, which reduce the population's purchasing power and raise production costs, etc.
Some of these factors have already been attenuated, with, for example, the acceleration of vaccination throughout the country. Other obstacles, however, are emerging, notably the rise in political tensions, doubts about the revival of the structural reform agenda and the risk of the water crisis being more than a source of inflation increase and leading to energy rationing.
Due to the higher uncertainty brought by this scenario, the performance of the industry tends to be particularly affected, as it produces many durable goods for consumption and investment whose demand requires confidence and predictability.
The industry, which had surpassed the pre-pandemic (Feb'20) production level by 3% at the turn of the year, in Jul'21 was once again 2.1% below that mark. This turnaround was widely seen in the sector. In Dec'20, 35% of its branches and 47% of the regional parks were at output levels below Feb'20, but these fractions increased to 58% and 80%, respectively, in Jul'21.
Although the depressed bases of comparison help inflate the current performance in relation to the same period last year, the recent loss of dynamism is also starting to affect year-on-year comparisons. The Focus Bulletin projections for 2021 as a whole, for example, which pointed to an increase of +6.5% at the beginning of Aug'21, a month later were reduced by half a percentage point, to +6.0%.
In Jul'21, the decline in relation to Jun'21 had a broad distribution, especially from the sectorial point of view, reaching 73% of the branches and 47% of the regional industrial parks monitored by the IBGE. Among the macro-sectors, two were in the red and the two that managed to obtain a positive rate were flat rather than growing, given the low result.
The best of the cases was capital goods, whose production varied +0.3% against Jun'21, with seasonal adjustment. This macro-sector has shown the most consistent recovery trajectory and has already overcome the impact of COVID-19 by 16.4%. The rate of Jul'21, however, was the smallest increase registered since May'20, when the macro-sector returned to the black.
Also on the positive side were semi and non-durable consumer goods, but with only +0.2% after a contraction in the previous month. In this case, the rise in the prices of some of its goods, high unemployment and restrictive measures due to the worsening of the pandemic in the first months of 2021 produced a series of figures either negative or very close to stability. Thus, in Jul'21 its output was 7.1% below that of Feb'20.
Intermediate goods, in turn, with a result of -0.3%, had its fourth consecutive negative rate. In 2021, in the few months that this macro-sector did not fall, it practically moved sideways. The best it achieved in the seasonally adjusted series was a mere +0.3% variation in May'21. Thus, it has been losing all expansion achieved after the COVID-19 shock and in Jul'21 was only 0.7% above the level of Feb'20.
Finally, the worst performance at the beginning of the second half of the year was registered by durable consumer goods, which dropped 2.7% compared to Jun'21. This macro-sector did not show a single month of growth in 2021 and in Jul'21 its output was 18.2% below the pre-pandemic level.