Letter IEDI n. 1179—Industrial exports in Q3'22: resilience of medium-high and medium-low technology
In recent months, the performance of the industry's trade balance has been mirroring the pace of export expansion, but with imports achieving with more robust results. The consequence is a further deterioration of the sector's external deficit: US$47.06 billion, the highest for Jan–Sep since 2014 and +26% above last year's figure.
In Q3'22, manufacturing exports grew +26.2% year-on-year, with a modest deceleration in relation to Q2'22 (+29.8%). On the other hand, the sector's imports increased +32.3%, slightly more than in the previous quarter (+31.5%).
Regarding exports, the improvement was ensured by the medium-high and medium-low technological intensity groups, whose pace of growth was relatively steady between Q2 and Q3'22. The high-tech and medium-tech industries have moved in the opposite direction.
The industrial groups by technological intensity, whose foreign trade is analyzed in this Letter IEDI, were defined following the methodology of the OECD: high, medium-high, medium and medium-low. In the low-intensity range are products from agriculture, forestry, fisheries and aquaculture, but it does not include manufacturing goods.
The medium-high technology industry registered an increase in exports of +30.6% in Q2'22 and +30.5% in Q3'22, always in relation to the same period of the previous year. This resilience received an important contribution from the acceleration of vehicles, the steady dynamism of machinery and equipment and, despite a deceleration, an expressive rate of expansion of chemicals.
In the medium-low technological intensity range, in turn, the increase in exports was of +30.6% in Q2'22 and +30.4% in Q3'22, supported by the growth of food and the acceleration of petroleum derivatives and biofuels.
At the same time, foreign sales of high technology went from +7.3% to +16.0% from Q2'22 to Q3'22. Aircraft manufacturing did not do well, falling 2% in the latter quarter; however, it was more than offset in absolute terms by the strong expansion of the pharmaceutical industry, whose exports jumped +51.8% in Q3'22.
In the opposite direction, the medium technological intensity industry, which had registered +31.1% in Q2'22, slowed down to +12.2%, largely due to the loss of dynamism of exports of metallurgy and non-metallic minerals.
As for imports of the manufacturing industry, the growth observed in Q3'22 was quite concentrated in two segments: petroleum derivatives and biofuels, with an increase of +106.2% against Q3'21, and chemicals, with +57.5%. Together, they accounted for 74% of the rise in imports in the quarter. This was due to a price factor, but also to larger quantities imported.
Thus, the highest increases were seen in the groups of: medium-low technological intensity, with +66.1%, due to widespread accelerations in all of its industrial branches, with emphasis on petroleum derivatives and biofuels; and medium-high technology, which, despite a lower pace of expansion than in Q2'22, still grew +37.4%, a consequence of the gain in pace of vehicles, machines and equipment, and the strong result of chemicals.
The mid-tech industry also made progress, rising +4.5% after two straight quarters of decline. Much of this was due to imports of rubber and plastic, non-metallic minerals and miscellaneous goods.
The high-tech range, in turn, was the only one with a fall in imports' expansion, from +19.8% in Q2'22 to +7.6% in Q3'22, mainly under the influence of the pharmaceutical industry, whose bases of comparison in 2021 also reflected imports of vaccines and of inputs for vaccines against COVID-19.
With ¾ of the year covered by statistics from the Ministry of Economy, it is already possible to identify the significance of 2022 for the industry's foreign trade. It was a period of deterioration of the balance, as we mentioned at the beginning, but exports, in nominal terms, reached the record level of US$135.9 billion in Jan–Sep'22, an increase of +29.9% compared to Jan–Sep'21. That is, in the year, the sector's foreign sales advanced marginally more than its imports: +28.9%.
As in Q3'22, in the year-to-Sep'22, the industry's expansion was led by the medium-high category (+30.2% versus Jan–Sep'21)— with emphasis on the export recovery of the automotive industry (+34%), approaching the values of 2017–2018, and of the chemical industry (+34.8%) under a positive price effect— and the medium-low technology range (+34%), supported mainly by petroleum derivatives and biofuels (+86.2%).
In high technology, it is also worth mentioning the performance of the pharmaceutical industry, whose exports in Jan–Sep'22 reached the highest level since 2014, with an increase of +30.6% compared to Jan–Sep'21. As a result, the sector represented 27% of the high-tech industry's total exports, almost double its share before the pandemic (15% in Jan–Sep'19).