Letter IEDI n. 1158—Manufacturing trade balance: growing deficits in the more technology-intensive groups
In the first half of 2022, manufacturing foreign sales kept expanding at a very high pace: +32.5% in relation to the same period of the previous year. This result was above that of the 1st half of 2021 (+22.1%) and higher than the increase in imports in the sector, which reached +27.0% in Jan–Jun’22, also in the year-on-year comparison.
Despite this, the industry's trade deficit continued to rise. The amount of US$-27.5 billion in the 1st six months of 2022 was the largest in recent years for the same period, losing only to that of 2014 (US$ -34.8 billion), before the 2015–2016 crisis and the shock of the pandemic.
The analysis of manufacturing foreign trade carried out by the IEDI according to the technology intensity groups, following the OECD methodology, shows two opposite developments in the trade balance: deterioration of the higher intensity groups and reinforcement of the surplus of the lower technology categories.
The deficit of the medium-high technology ranges increased +34.8% from the 1st half of 2021 to the 1st half of 2022, followed by the deficit of the high-tech industry, which advanced +28.4%. The performance of the medium-low and medium-technology-intensive groups partially compensated for this worsening, with surpluses growing by +37.8% and +174%, respectively.
In addition to these figures, today's Letter IEDI also analyzes the evolution of exports and imports in Q2'22. For the industrial sector as a whole, external sales showed a small slowdown, from +35.4% in Q1'22 to +30.2%, due to only one group: the medium-low technology industry, which, even so, did not fail to show a significant growth rate.
Medium-low technology exports, which had grown +44.2% in Jan–Mar'22, registered +31.1% in Q2'22, due to the slowdown in all of its branches, especially petroleum products, metal and wood products, paper and pulp.
The growth pace of medium and medium-high technology exports, on the other hand, changed little from Q1 to Q2'22. In the first case, it went from +29.5% to +31.8%, respectively, in a movement accompanied by most branches; the only more substantial acceleration was seen in non-metallic minerals (from +12.7% to +18.4%).
In the second case, the medium-high category, the increase in foreign sales went from +29.5% to +30.8% in the same period, thanks to more pronounced changes in two of its branches: the automobile industry, which had registered +16.9% in Jan–Mar'22 and then +36.4% in Apr–Jun'22, and other land transport equipment, whose decline was softened (-9.2% and -0.9%, respectively).
Exports of the high-tech industry stood out for having returned to the black, after successive quarters of falls. They registered +6.5% in Q2'22, due to the expansion of foreign sales of aircrafts (+2.4%) and the continued growth of electronics and the pharmaceutical industry.
As for imports in Q2'22, in manufacturing as a whole the increase was of +31.6%, above the performance of Q1'22 (+22.1%). This rise in foreign purchases in the sector came from the groups of medium-high technology (+40.6% in Apr–Jun'22), especially chemicals and motor vehicles, and medium-low technology (+49.4%), due to food, beverages and tobacco (+18.9%) and petroleum products (+101%).
In the other two groups there was some accommodation, and the growth rate of high-tech imports went from +30.9% to +18.8%. In the case of medium intensity, the decrease went from -2.2% to -8.8%, mainly due to metallurgy (-11.1%).