Letter IEDI n. 1100—Manufacturing by Technology Intensity: 6 months of contraction
In the first half of 2022, the production of the Brazilian manufacturing industry was lower than in the same period of the previous year but, as the IEDI has previously showed (see Letter No. 1155), there was an important mitigation of losses in the months of April–June. In today's Letter, we analyze this performance by aggregating the industrial branches according to their technological intensity.
For this, the IEDI used the methodology disseminated by the OECD that classifies the manufacturing industry into four groups: high, medium-high, medium and medium-low technology intensity. No branch of the sector is classified as low technology, a range composed of primary activities, such as agriculture and livestock, production and distribution of electricity, gas, water and urban cleaning, construction and a wide range of services.
In the first half of 2022, manufacturing as a whole decreased 2.1% compared to the same period of the previous year. However, much of this was due to its performance in Jan–Mar, since in Q2'22, although it did not actually grow, production in the sector at least avoided negative terrain, registering +0.4%.
According to the IEDI analysis, in Jan–Jun'22, three of the four manufacturing categories by technology intensity were not only in the red, but fell more than the sector as a whole. The medium-low industry was the only one to grow (+0.5%), avoiding greater losses for the aggregate, thanks especially to the production of petroleum products (+10.3%) and food, beverages and tobacco (+1.0%).
The biggest drop was in the medium technology intensity category (-6.6%), with a sharp decrease in rubber and plastic (-10.0%), followed by the high-tech range (-4.8%), where the fall was driven by the pharmaceutical and pharma-chemical sector (-9.1%), and then by the medium-high category (-3.4%), in which the branch of electric machines and appliances was the one that contracted the most (-14.6%).
The easing of the overall picture of manufacturing in Q2'22 happened in all technology intensity groups. Only the medium-low range was back into the black, registering +3.1% compared to Q2'21, under the influence of textile production, which went from a drop of 17.9% in Q1'22 to a growth of 1.4% in Q2'22, and petroleum products, with an increase of 14.3%. The food, beverage and tobacco industry moved in the opposite direction, being virtually flat (+0.1%) in Apr–Jun'22.
The medium-high-tech industry also did not do badly, going from a decline of 6.0% in Jan–Mar'22 to a rate of -0.8% in Q2'22. This was notably due to the automotive sector, whose vehicle production registered -10.2% in Q1'22 and -0.6% in the following quarter. Chemicals were in the black (+1.2%) and machinery and equipment (0%) avoided negative ground in the latter period. The result of this range in Apr–Jun’22 was constrained by the performance of electric machines and appliances (-9.7%).
The high-tech industry, in turn, reduced its level of decline to almost 1/3, going from -7.3% to -2.4% from the 1st to the 2nd quarter of 2022. The source of this result was the sector of electronics which, after three negative rates, returned to growth in the latter quarter: +2.1%, thanks to office and computer materials. The pharmaceutical and pharmacochemical sector, for the fifth time in a row, showed a negative variation in the year-on-year comparison and at a not insignificant pace: -7.7%.
The medium technological intensity group, although falling much less than in Q1'22 (-4.7% versus -8.5%), was responsible for the worst performance in Apr–Jun'22. Virtually all of its segments were in the red, with worsening in metallurgy (-4.8% in Q1'22 and -6.0% in Q2'22) and no change in non-metallic minerals (-5.1% and -5.2%, respectively). The rubber and plastic sector, on the other hand, had an important improvement, from -15.3% to -4.3%, respectively.