Letter IEDI n. 1145—Industrial decline in all technological intensities
At the beginning of 2022, the bottlenecks in supply chains and the limits on demand—due to unemployment, inflation and rising interest rates—did not leave space for industrial production to expand. For the third consecutive quarter, the sector was in the red, registering -4.5% in Q1'22 in relation to Q1'21. Manufacturing—that is, the industry minus extractive activities—did not do any better: -4.8% in the same comparison.
Today's Letter IEDI analyzes industrial performance in the first three months of the current year according to technological intensity groups, following the methodology disseminated by the OECD. Manufacturing has branches in 4 groups: high, medium-high, medium and medium-low technology.
In summary, the two ends of the technology intensity scale have been seeing output decline for longer, but at least the magnitude of their falls underwent some easing in early 2022. The intermediate groups, in turn, suffered more recent setbacks, but saw their condition worsen with the turn of the year.
Like the manufacturing industry as a whole, the high-tech and medium-low intensity groups showed negative signs in the last three quarters. The decline continued to be more pronounced in the high-tech range, even though it fell less than at the end of last year: -11.7% in Q4'21 and -7.3% in Q1'22 compared to the same period the previous year. In the medium-low intensity industry, the result was -6.8% to -2.3%, respectively.
Milder losses in electronics, especially due to the production of computer and communication equipment (which grew +7.6%), was the main factor behind the behavior of high technology in Q1'22. In the medium-low category, decisive contributions came from the growth in food and beverages (+2%), after four quarters in the red, and from petroleum products (+5.4%), branches favored by the appreciation of commodities due to the war in Ukraine.
The intermediate technological intensity groups, in turn, only returned to negative rates in the last quarter of 2021, accumulating, therefore, two and not three consecutive quarters of decline, unlike the other groups. The beginning of 2022, however, brought worse results.
Medium-high technology registered -5.2% in Q4'21 and -6.1% in Q1'22. Two of its branches continued to fall sharply in these first months of 2022: -10.2% in the automotive sector and -18.6% in electric machinery and devices. The recent deterioration came from chemicals, with +0.1% in Q4'21 but -2.5% in Q1'22, and from machinery and equipment, with +2.1% and -2.9% respectively, which returned to negative figures for the first time since mid-2020.
The medium-intensity technology industry took the lead in the setback in Q1'22, a position hitherto occupied by high technology. Its output fell 8.7% against Q1'21, after decreasing 6.4% in Q4'21. Virtually all of its branches have worsened, such as non-metallic minerals (-5.3%), rubber and plastic (-16.3%) and miscellaneous goods (-29.4%). This category did not fall any further only because one of its major branches maintained its performance: metallurgy, which registered -4.4% and -4.6% in Q4'21 and Q1'22, respectively.