Letter IEDI n. 1114—Still no progress
The year 2021 is drawing to a close and the industrial scenario is still showing no progress. According to the latest IBGE data, the sector continued to contract in Sep'21, totaling seven out of the first nine months of this year in the red. The industry lost all output improvement achieved in the second half of 2020 and today production is lower than before the COVID-19 shock.
From Aug'21 to Sep'21, after discounting seasonal effects, there was a 0.4% decline, taking industrial production to a level 6.3% lower than that of Dec'20. Regarding the pre-pandemic period—that is, compared to Feb'20—the game turned to the industry during these nine months of 2021.
In Dec'20, the sector was 3.3% above the pre-pandemic production level and 65% of the 26 segments monitored by the IBGE had already overcome the initial COVID-19 shock. In Sep'21, the industry was once more 3.2% below the level of Feb'20, and now 65% of its branches also presented a gap.
At the root of this turnaround is the fact that the direct effects of the pandemic have given rise to consequences that are also very adverse to industrial growth, such as bottlenecks in production chains, inflation acceleration, high unemployment, etc. To these, other challenges were added, like the water crisis, political tensions and doubts about structural reforms. All of this creates uncertainties, increases costs and restricts the market for industrial goods. What has helped a little was the increase in industrial exports, which in Jan–Sep'21 reached +15.3% in volume.
In light of the disappointing performance in 2021, CNI and FGV indicators suggest that the confidence of industrial entrepreneurs is shaken. Both have registered a decline since the beginning of the second half of the year, as a result of the assessment of the present situation and also of expectations regarding the future. Despite this, for the time being, the indicators remain in the positive region, but heading towards stability.
Not even the statistical bonus, derived from last year's very depressed comparison bases, can mitigate the low dynamism phase any longer. In Q3'21 compared to Q3'20, the industry registered a 1.1% decrease. Hinting that this result could still worsen, the loss was almost four times more intense in Sep'21 alone: -3.9% compared to Sep'20.
Not even capital goods, which had been showing a more favorable evolution, were spared in Sep'21. Production in the sector registered -1.6% in relation to Aug'21, in the series with seasonal adjustment. The other industrial macro-sectors were virtually flat.
After consecutive months of high output, capital goods have already accumulated two declines in a row, both in Aug'21 and Sep'21 in the seasonally adjusted series. Compared to last year, they are still growing significantly (15% against Sep'20), but at half the rate of before. This deceleration was generalized, but it hit capital goods for the industry itself (+1%) and for mixed use (+7%) with intensity.
Intermediate goods, in turn, presented a sequence of six consecutive months of decline in the seasonally adjusted series, but from Aug'21 to Sep'21 the picture came closer to stability. Compared to 2020, there was no growth for three months, resulting in a 2.0% loss in Q3'21.
For durable consumer goods, signs of recovery are even scarcer. In 2021, they did not register a single month of growth in the seasonally adjusted series, and compared to 2020 they returned to a significant level of decline: -22.3% in relation to Sep'20 and -16.9% versus Q3'20. Automobiles, white and brown line household appliances and furniture had double-digit losses in Jul–Sep'21.
It is worth remembering that, for having assembly lines based on a large number of parts and components and due to a high penetration of imported inputs, durable consumer goods are more exposed to bottlenecks in supply chains. In addition, the normalization of household consumption of services also removes resources previously channeled to the market for these goods due to the pandemic and social isolation.
Finally, semi- and non-durable consumer goods, which had already been growing little, seem to be stopping. Although this was the only macro-sector with a positive change in the seasonally adjusted series in Sep'21, its rate was a mere +0.2% compared to Aug'21. In addition, it fell no less than 5% compared to Sep'20, accumulating a loss of 2.8% in Q3'21. With prices on the rise, food and beverages were in the red, but also textiles, hygiene and cleaning goods, and pharmaceutical products.
This set of recent industry results distances the sector from a consistent growth trajectory and harms the necessary modernization efforts, at the required pace and intensity, to keep up with global trends towards the industry 4.0 and environmental sustainability.