Letter IEDI n. 1142—Industry in the 1st quarter of 2022
In Mar'22, industrial output escaped negative growth, but expanded little. The variation was of only 0.3% compared to the previous month, seasonally adjusted; that is, less than half the figure recorded in Feb'22. It is early to see this recent evolution as the beginning of a more favorable phase for the sector, notably in the face of the prolongation of the war in Ukraine and new lockdowns in China due to COVID-19 outbreaks. It would also require a much more robust performance than what we have seen by now.
The industry continues to produce less than a year ago, registering its third consecutive quarter of decline. After shrinking 1.1% in Q3'21 and 5.8% in Q4'21, industrial production fell 4.5% in Q1'22, the first time since the beginning of the pandemic that all industrial macro-sectors were in the red.
Based on IBGE data, the IEDI evaluated the recent evolution of 93 manufacturing segments and identified output losses in 66 of them in the first quarter of 2022 versus the same period of the previous year. This is equivalent to 71% of the segments analyzed; for 20% of the total the falls were quite intense, of at least -20%, as in the cases of reproduction of recorded material (-65%), unspecified household appliances (-33.6%), light bulbs and lighting equipment (-31.2%) and textile fibers (-28.5%), among others.
Thus, according to the indicators of both the CNI and the FGV, the evaluation of the current business environment by the entrepreneurs of the sector has been oscillating in the region of pessimism. This behavior was recorded in both Mar'22 and in Apr'22, despite some improvement. For 2022, the most recent projections of the Focus Bulletin for industrial GDP point to a decline of 0.5%.
In Q1'22, even capital goods, which had been growing, slipped into negative territory, although in Mar'22 (+4.4% against March'21) their situation registered some progress. In this beginning of 2022, the biggest setback was on the production of capital goods for the industry itself which, after falling 9.5% in Oct–Dec'21, contracted 13.8% in Jan–Mar'22. It is another indication that the industry is not doing well.
Intermediate goods saw a slight easing in their pace of decline compared to the result for late last year: -4.6% in Q4'21 and -3.4% in Q1'22. Much of this was due to food intermediates (+2.9%), whose production returned to the black, and vehicles (-8.0%), with a less intense drop. Other segments continued to shrink as much as before: textile intermediates (-21.6%), metallurgy (-4.6%), packaging (-15.7%) and construction inputs (-9.6%).
Durable consumer goods’ decline also showed little sign of improvement, registering -18.3% in Jan–Mar'22, due to a deepening of the decrease in furniture production (-36.1% versus Jan–Mar'21) and a maintenance of the pace of falling of household appliances (-25.3%). The branch that lost a little less was vehicle production (-16.3%), but not enough to suggest a change of route.
Finally, semi-durable and non-durable consumer goods were the macro-sector in which the decline became less acute, due to the growth of the meat industry (+14.2% compared to Jan–Mar'21), favored by the resumption of exports to the Chinese market, and production of alcohol and gasoline (+5.8%). A smaller drop in the beverages branch (-2.1%) also contributed. In contrast, in Q1'22 there was no improvement in footwear, textiles and clothing, nor in pharmaceuticals and pharma-chemicals.