Letter IEDI n. 1243—Industry: positive signs at the end of the year
Brazilian industry's output increased in Nov'23, after a basically stagnant sequence of months. However, the result was not robust and was only due to the advance of the extractive branch. Manufacturing continued to oscillate around zero.
After discounting seasonal effects, the industry registered +0.5% from Oct'23 to Nov'23, supported by the 3.4% growth of extractive activities, which cushioned the 0.2% decline in manufacturing. Although these are one-off data, that is, only one month and in a short-term comparison, they are representative of the industry's behavior over the eleven months of 2023 already covered by IBGE statistics.
In Jan–Nov'23, the general industry registered 0.1% in relation to the same period of the previous year, due to a 6.1% increase in the extractive sector. Manufacturing shrank 0.9% in the period. The last months of the year, however, point to some easing of the situation in this part of the industry.
Taking only the two-month period of Oct–Nov'23, manufacturing managed to avoid the negative sign, registering +0.3% compared to the same period of the previous year. This evolution and a reinforcement in the extractive sector (+6.6% against Oct–Nov'22) ensured a result of +1.2% for the industry as a whole.
Within manufacturing, 63% of its branches decreased in Jan–Nov'23, with the most serious cases being computer, electronic and optical equipment (-10.9% against Jan–Nov'22) and electrical machines and appliances (-10.5%), but also machinery and equipment (-7.0%) and vehicles and auto parts (-6.8%).
In fact, activities associated with investment and more sensitive to high levels of interest rates lead industrial losses in 2023. Production of capital goods fell 10.7% in Jan–Nov'23 and that of durable consumer goods saw its dynamism greatly reduce throughout the year.
Despite this, most industrial branches improved in the two months considered, in general, helped by lower bases of comparison. Some of them did not leave the negative terrain, but managed to reduce their losses. The result of Oct–Nov'23 was better than Q3'23 for 71% of the manufacturing branches identified by the IBGE.
And considering the confidence of industrial entrepreneurs, it is possible that Dec'23 will not offset what was gained in Nov'23. The assessment of current business conditions improved both in the CNI survey and in the FGV indicator, reaching, in the latter case, the highest level since Oct'22. Despite this, it should be emphasized that this improvement did not make the evaluations positive; they just became less adverse.
Another favorable fact is that inventories are more adjusted than before, which may make room for a higher pace of production in Dec'23. According to the CNI survey, Nov'23 was the first time in the year that the assessment of companies about their inventories came closer to equilibrium (50 points). In 60% of industrial branches, the levels of Nov'23 were balanced or below those planned by the firms.