In Sep'22, the industry was an exception among the large economic sectors because it was the only one to see its level of activity contract. For the second time in a row, its physical production fell 0.7%, after adjusting for seasonal effects. Retail trade and services were responsible for supporting economic dynamism at the end of the quarter.

Services' real revenue, whose growth has been showing good resilience, varied +0.9% from Aug'22 to Sep'22, with seasonal adjustment, thus surpassing market projections for the month. Broad retail sales, which include vehicles, auto parts and construction material, registered an expansion of +1.5% after four months of difficulties.

As a result, the Central Bank's IBC-Br index, which acts as a proxy for GDP, went back to positive ground, even though its result was limited by the industry's decline. It varied +0.05% between Aug'22 and Sep'22, already discounting the seasonal effects, not offsetting the 1.13% drop of the previous month.

Although it did not do well recently, the industry expanded in Q3'22, helped by weak bases of comparison in the same period last year. Thus, it interrupted a sequence of four consecutive quarters in the red and registered +0.9% in Q3'22.

Among the industrial macro-sectors, only one was above this figure: +8.2% in durable consumer goods, driven by vehicles and other transport equipment. Capital goods and intermediate goods grew by the same magnitude: +0.7% versus Jul–Sep'21, while semi-durable and non-durable consumer goods were virtually flat, with a variation of only +0.2%.

Among the regional parks, 47% of local industries were still in the red in Q3'22 compared to Q3'21, but São Paulo, the largest industrial park in the country, grew again (+1.9%), although it barely compensated for the fall in Q2'22 (-1.8%). Other parks in the black were Rio de Janeiro (+4.6% against Q3'21), Rio Grande do Sul (+4.3%) and, to a lesser extent, the Northeast region (+2.1%).

While the industry stood out for the improvement in its situation, services called attention for the maintenance of their pace of expansion and for the diffusion of positive signal among various segments. In Q2'22 and Q3'22, the sector's revenue rose by +8.3% and +8.2%, respectively.

The strongest increases were seen in the branches most directly favored by the control of the pandemic. The result of transport (+14.5%) has been influenced by the return of mobility, and all its components continued with double-digit expansions, including air transport. With the return of face-to-face activities, services provided to households grew +20.7% due to their two components, accommodation and food and other personal services.

Regarding retail, however, unlike the industry and services, Q3'22 brought a deterioration in performance, a movement led by branches more affected by the worsening of credit conditions, in a context of rising interest and default rates. 

In Q3'22 versus Q3'21, real sales of broad retail fell 2.3%, almost four times more intensely than in the previous quarter. Out of its 10 branches, five were in the red and among those that grew, 2 registered deceleration. The negative highlights were construction material (-9.6%), furniture and household appliances (-9.8%), textiles, clothing and footwear (-10.6%) and other articles for personal and household use, which include department stores (-17.4%). 

The overall result could have been worse had it not been for the significant increase in fuels (+27.2%), driven by the reduction in prices due to the change in tax collection. Another positive figure came from supermarkets, food, etc. (+1.6%) which, despite a certain slowdown, proved to be resilient.

Based on a better-than-anticipated result of services, the projections for the growth of the Brazilian economy in 2022 were revised upwards. The median value of the forecasts for 2022 GDP in the Central Bank's Focus Bulletin was revised from +2.76% to +2.80% from Nov 11 to Nov 18, 2022. By 2023, however, much weaker developments are expected: +0.7%.

For the total industry, GDP projected in the Focus Bulletin for 2022 increased less, from +1.41% to +1.45% in the same period, while for 2023 the average of market expectations dropped by half between Nov 11 and Nov 18, 2022 (from +0.2% to +0.1%), indicating a deterioration from a low growth situation this year to stagnation next year.

The full text is available in Portuguese.