The tenth month of the year ended with industrial production slightly in the black after two months of downturn. From Sep'22 to Oct'22, it registered +0.3%, after adjusting for seasonal effects. The low growth was due to the high concentration of good results both from a sectoral and a regional point of view.

Of the 26 branches identified by the IBGE, only 7 registered output increases in Oct'22, a minority share of 27% of the total. Regionally, of the 15 industrial parks, 6 expanded, which represent 40% of them.

Although the country's employment situation improved and the government transferred resources to households in recent months—through, among other actions, the increase in the value of the Brazil Aid benefit—there are factors that continue to play against a more robust industrial dynamism, such as: the higher level of interest rates—which harms credit conditions, essential for the markets of durable goods—and the remaining bottlenecks in production chains.

In relation to 2021, however, more modest bases of comparison have helped to obtain more robust variations in recent months. Compared to Oct'21, the national industry grew +1.7%, its third consecutive increase. This has ensured a reduction in losses in 2022, although the figure remains negative until Oct'22: -0.8%.

In Jan–Oct'22, all four industrial macro-sectors were in the red, but three of them performed very close to the sector’s aggregate, in a path towards stability. 

This was the case of capital goods, whose output was the one that decreased the least in relation to Jan–Oct'21: -0.5%. But this is not very encouraging, since this macro-sector had grown +27.8% in 2021 as a whole. Thus, 2022 is a year of inflection for this part of the industry, which has been driven mainly by the production of capital goods for the industry itself, in an unfavorable signal for the sector's investments.

Semi-durable and non-durable consumer goods also accumulate a moderate loss in Jan–Oct'22: -0.6% versus the same period last year. In this case, the picture is even worse given that 2021 had not been a good year (-0.4%), not to mention 2020 (-6.0%). The textile, clothing and dairy industries are the main negative highlights.

Intermediate goods, in turn, accumulate a 0.7% decrease in Jan–Oct'22, indicating that they are having a more difficult year than in 2021 (+3.3% in Jan–Dec). Inputs for construction and for textiles, packaging and basic metallurgy contributed to this result in 2022.

Finally, durable consumer goods is the macro sector that presented the greatest loss in Jan–Oct'22, although this has been reduced with the help of low bases of comparison in the second half of last year. Its result is -3.7%, remembering that in 2021 it had grown only 2%, that is, far from enough to offset the 19.8% decline in 2020.

This part of the industry is particularly affected by bottlenecks in supply chains—since its production is based on the assembly of goods composed of several parts and components (many of them imported)—and by the deterioration of credit conditions, due to the increase in interest rates and the high levels of household debt. 

In addition, the resumption of consumption of services may also be shifting the fraction of households' budget that could be channeled to the acquisition of these goods. The branches of durable consumer goods that fell the most in 2020 were furniture and household appliances.

The signs for the coming months emerging from surveys of entrepreneurs’ level of confidence suggest an economy still very much constrained this end of the year. The component of these indicators that measures the assessment of current conditions decreased in Nov'22. In spite of the recent elections, it is expected that its effect will reflect more on the other component of the indicator, referring to expectations regarding the future.

In the case of the CNI index, the assessment of current conditions remained in the zone of optimism, but at a lower level. In the case of the FGV indicator, it not only remained in the region of pessimism, but also fell to the lowest level since Jul'20, after adjusted for seasonal effects. In turn, the Purchasing Managers’ Index–PMI Manufacturing, calculated by the consulting firm Markit Financial Information Services, is at the lowest level since the beginning of the pandemic.

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