In 2023, the Brazilian industry in aggregate did better than in 2022 (+0.2% versus -0.7%), although there was no great progress. Manufacturing, on the other hand, repeated the negative sign and further aggravated its losses: from -0.4% in 2022 to -1.0% in 2023. This was largely due to production of capital goods, as the IEDI emphasized on other occasions (Letters n. 1248 and 1250, for example).

In fact, manufacturing did not have a single quarter of output increase in 2023, but it is important to note the easing registered at the end of the year: -1.0% in Q1'23, -1.5% in Q2'23, -1.1% in Q3'23 and -0.4% in Q4'23, always in relation to the same quarter of the previous year. Low bases of comparison, after successive falls, helped in this process.

Today's Letter IEDI analyzes the evolution of the manufacturing industry by technological intensity last year, according to the methodology disseminated by the OECD. This study is part of the detailed monitoring of the Brazilian industry that the Institute systematically carries out.

According to this methodology, manufacturing is divided into four technology-intensity groups: high, medium-high, medium and medium-low. There are no branches in the low-tech group, which brings together agricultural and services activities. Another observation is that the extractive industry is classified as medium-low technology. 

For the 2023 aggregate, the branches of greatest technology intensity were those that led the deterioration of manufacturing output in relation to 2022. Here are also the exceptions to the general trend of Q4'23, that is, those activities that did not experience a mitigation of losses at the end of the year.

This is an adverse feature of the 2023 industrial result. The branches of greater technology intensity tend to create interactions with a more diverse set of activities, given the complexity of their products, and are also the ones that invest the most in innovation. In this sense, Brazil has gone against the grain of the world, since, according to UNIDO, these are branches that are leading industrial dynamism globally.

In Brazil, the high-tech industry, which had registered -0.3% in 2022, fell 4.9% in 2023, with a deep deterioration in Q4'23: -16.4% compared to the same period of the previous year. The worst results were observed in the production of office and computer supplies, and radio, TV and communication equipment. At the end of the year, the pharmaceutical industry helped to intensify the fall.

The medium-high technology industry presented the worst result of 2023: -6.6% in relation to the previous year, and there was little relief at the end of the year as it registered -6.4% in Q4'23. Among its branches, the negative sign was widespread: -10.1% in electrical machinery and equipment, -7.2% in mechanical machinery and equipment, -7.1% in vehicles and auto parts and -5.9% in chemicals, which was the only branch to have a less adverse end of year.

In the medium technology intensity category, output did shrink in 2023, but this occurred to a lesser extent than in the two previous groups and with some attenuation at the end of the year. It registered -2.1% in Jan–Dec'23 and -1.9% in Q4'23, always in relation to the same period of the previous year.

The rubber and plastic branch cushioned the decline of the group as a whole, with an expansion of 1.2% in 2023 and 2.7% in Q4'23. Metallurgy production did not grow, but at least it did not fall as much in 2023 (-2.9%) as in 2022 (-5.0%).

Finally, medium-low technology was the only manufacturing group to increase production. Its output grew 2.3% in 2023, reaching 4.4% in Q4'23. In addition to including branches whose markets are less impacted by the high levels of interest rates in the country, it also has more exporting activities and, therefore, can resort to the foreign market to grow. The growth of total real income also injected dynamism into the domestic market of many of these branches.

In 2023, the increase was driven by food production, which registered 3.2%, and especially by the branch of petroleum derivatives and biofuels, which advanced 6.1%. In the last quarter of the year, both remained very dynamic: +3.9% and +10.1%, respectively. They were joined by the textiles, clothing and footwear sector which, after five consecutive quarters in the red, stopped falling and registered +1.0% in Q4'23.

In the first months of 2024, data already released by the IBGE indicate that there may be progress in the composition of the performance of manufacturing, as branches of greater technology intensity are growing more, such as computer and electronic equipment, electrical machinery and appliances, vehicles and auto parts. More in this regard can be found in Letter IEDI n. 1258, “Promising context,” recently released.

The full text is available in Portuguese.