In 2022, the physical production of Brazilian industry showed a further decline. Despite the countercyclical measures adopted by the government—such as the release of FGTS funds, increase in Auxílio Brasil benefits and cuts in fuel taxation—the rise in interest rates and the corrosion of the population's purchasing power, due to inflation and higher cost of credit, were more decisive for industrial performance.

The -0.7% figure was the sixth negative rate recorded in the last ten years, although it was the least intense. In this period, years of more robust expansion were observed only when the bases of comparison were very low, such as in 2017 (+2.5%), after three consecutive years of intense decline, and 2021 (+3.9%), which did not fully compensate for the losses of the previous year, when COVID-19 hit the country.

A survey carried out by the IEDI, breaking down the industry into ninety three segments, shows that there was a reversal of scenario between 2021 and 2022. The segments with positive growth in Jan–Dec represented 61.3% of the total in 2021, a share that decreased to 31.2% in 2022. In contrast, the weight of the segments with negative performance jumped from 38.7% to 68.8%, respectively.

It should also be noted that there was a significant increase in the number of industrial segments with profound losses, that is, those with a drop equal to or more intense than -10%. Their share was of 6.5% in 2021 and 21.5% in 2022. Not even the last quarter of 2022, when the bases of comparison helped the industry, brought a trend reversal.

In Q4'22 versus the same period of the previous year, the industry as a whole registered growth of 0.5%, continuing the positive movement registered since early in the second half of the year, although with less strength (+0.9% in Q3'22). The number of segments with double-digit declines, however, reached 25.8% in the period, far surpassing the share of those that managed to expand at a rate higher than 10% in Oct–Dec'22 (15.1% of total segments).

Among those that worsened in the last quarter of the year, we can mention: electronic components (-12.0%), ceramic products (-19.5%), fertilizers (-21.0%), wood products, except furniture (-25.7%) and communication equipment (-29.6%), among others.

As for the industrial macro-sectors, they all ended 2022 in the red. The macro-sector with the greatest difficulties was durable consumer goods, with a variation of -3.3% compared to the previous year. It is also the one least able to offset the losses of the worst moments of the pandemic. In 2020 it fell -19.8% and in 2021 it grew only +2.0%.

It is worth remembering that the production of durable consumer goods tends to be more vulnerable to bottlenecks in production chains, since it is based on assembly lines with a large number of parts and components, many of them imported. Along with capital goods, the sector is also particularly harmed by rising interest rates and worsening credit conditions (in this case, credit to households). In addition, with the pandemic under control, higher-income consumers tended to shift demand from these industrial goods towards services, whose consumption had been depressed.

In any case, like the rest of the industry, durable consumer goods returned to positive ground in the second half of 2022 in the year-on-year comparison. However, it still lost dynamism from Q3'22 (+8.2%) to Q4'22 (+2.9%), due to the slowdown of the automotive industry. Furniture and household appliances did not have a single positive quarter in 2022.

All other macro-sectors had an annual result equal to or not as adverse as the general industry's, approaching a situation of stability. Intermediate goods decreased 0.7% in Jan–Dec'22 against the same period of the previous year. Its reaction in the second half of the year was weak and it reached Q4'22 virtually stagnant (+0.3%). 

Capital goods and semi-durable and non-durable consumer goods were almost flat: +0.3% and +0.2%, respectively, in the year. In Q4'22, semi-durable and non-durable consumer goods gained robustness, with an increase of 1.1% in Q4'22, due to two segments: fuels and pharmaceuticals. 

As for capital goods, there was no substantive improvement, with output registering variation of 0.4%, that is, almost the same as the figure for Jan–Dec'22, but with a flagrant worsening in mixed-use capital goods (-12.5%) and capital goods for agriculture (-12.1%). In the case of capital goods for the industry itself, we had another quarter of loss: -6.3%. As the IEDI has been highlighting, this is not a good sign for the sector's level of investment, so necessary for its modernization.

Although Q4'22 was positive for all macro-sectors and for the industry as a whole, by having brought some slowdown—except for semi-durable and non-durable consumer goods—a yellow light is lit for industrial dynamism in early 2023. Something that is also expressed in the confidence indicators of entrepreneurs in the sector.

In Jan'23, the CNI indicator was for the first time since Jul'20 in the region of pessimism, due to both the present assessment of the business environment as well as to the expectation component for the coming months. The FGV indicator also contracted in early 2023, remaining in the region of pessimism in which it has been since Sep'22.

Finally, another indicator often used to assess the perspective of industry dynamism, the Purchasing Managers’ Index–PMI Manufacturing, calculated by the consultancy Markit Financial Information Services, also indicated a worsening of business in Jan'23.

The full text is available in Portuguese.