Letter IEDI n. 1119—No respite
Apparently, the low bases of comparison recorded in 2020 will save the year 2021 for the industry. Excluding this statistical factor, little remains of the sector's performance. As GDP data showed last week, industrial GDP was flat and manufacturing output did not have a single quarter of growth this year in the seasonally adjusted series. The evolution of physical production in recent months has not brought any encouragement either.
According to the IBGE, the production of the country's general industry fell again in Oct'21 (-0.6%), so that the sector was in the red for most of 2021 (in 8 of the 10 first months). Moreover, in Nov'21 industrial entrepreneurs' confidence indicators deteriorated, with some of them returning to pessimism.
In other words, there is a great chance that the current situation of the sector will not progress significantly in the coming months. And to complicate matters, the 2022 economic outlook has been proving increasingly unfavorable. According to the latest edition of the BCB Focus Bulletin, Brazil's total GDP is expected to grow a mere 0.5% in 2022 and that of the industry should not exceed 0.35%. For industrial production a rate of 2% is expected.
One of the factors harming the industry—the bottlenecks in supply chains—may still be present if new variants of the coronavirus lead to restrictions on economic and logistical activities in certain parts of the world and in Brazil. Stocks, which function as a means of increasing the resilience of the chains, are being replenished, but the latest CNI survey shows that most sectors (62%) still assessed their levels as insufficient.
The 2015–2016 crisis and the losses from the COVID-19 pandemic caused the current level of industrial production to be 20% below the previous peak reached in May'11. Now, the trajectory seen in the present year and the expected performance for 2022 are absolutely insufficient to enable the modernization and innovation efforts that our industrial system as a whole needs to keep up with the technological and competitive trends in the world.
From Sep'21 to Oct'21 (with seasonal adjustment), the decline in industrial production was concentrated in a minority of regional parks (30% of the total); however, the drop was severe in São Paulo—the largest and most diversified industrial park of the country— and continued to affect a wide range of branches.
Output declined in 19 of the 26 branches monitored by the IBGE in Oct'21, the equivalent of 73% of the sector's total. In 17 of them, or 65% of the total, production was below the pre-pandemic level, and in more than half this gap reached double digits. Among the macro-sectors, the decline was equally widespread: three lost production in the seasonally adjusted series and only one managed to grow.
The only exception was capital goods, whose 2.0% increase in Oct'21 versus Sep'21 was not even enough to offset the losses of the two previous months. Durable consumer goods (-1.9%) did not record a single month of growth in 2021 to October. Semi and non-durable consumer goods and intermediate goods, in turn, were not far behind and registered drops of 1.2% and 0.9%, respectively, after adjusting for seasonal effects.