From Mar'24 to Apr'24, the physical production of Brazilian industry shrank 0.5%, after discounting seasonal effects, largely due to the contraction of the extractive sector, which reached -3.4% in the same comparison, driven by iron and oil extraction, according to the IBGE. The recent negative figure, however, does not reverse the gains of the first months of the year.

Manufacturing, which includes all industrial branches other than extractive activities, has been expanding since Dec'23 and in Apr'24 registered +0.3% in the seasonally adjusted series. Its added value also grew, as seen in the latest GDP data: +0.7% in Q1'24, correcting for seasonal effects.

In addition to the sequence of increases in total production, April's expansion was quite widespread. Total manufacturing growth stemmed from positive figures in 18 of its 24 branches identified by the IBGE, which represents a significant majority share of 75%. Notable advances marked the production of vehicles (+13.2%, with adjustment), pharmaceuticals and pharmachemicals (+10.8%) and electrical machines and appliances (+9.0%), among others.

There were still other favorable aspects. Both the FGV and CNI indicators showed a rise in the use of installed capacity in the manufacturing industry between Mar'24 and Apr'24, and despite some decrease in May'24 it remained at a higher level than what was seen at the end of Q1'24. In addition, inventories are balanced in the sector as a whole and the share of branches in which companies still considered them above planned levels fell from 32% in Mar'24 to 24% in Apr'24.

Thus, the evaluation of the current business evolution for the month of May'24 improved in the CNI and FGV surveys. Another indicator used to assess the future situation of the industry, the Purchasing Managers’ Index – Manufacturing, worsened, but remained in the positive region in May'24.

Although we know that the environmental disaster in Rio Grande do Sul will harm the industry's results in the short term, the indicators mentioned above denote the existence of a more dynamic industrial environment at the turn of the quarter, for which cuts in the base interest rate have been of great help, unlocking branches of durable goods (for consumption and investment), which until recently restricted industrial growth as a whole.

Capital goods (+3.5%, with adjustment) and durable consumer goods (+5.6%), whose markets require credit, were the ones that grew the most in Apr'24. In Jan–Apr'24, these two macro-sectors also led industrial expansion. Capital goods reversed the 13.9% drop of the 2nd half of 2023 to +4.7% in Jan–Apr'24 and durable consumer goods went from -2.6% to +6.7%, always in relation to the same period of the previous year.

It is also worth mentioning that, in the year to Apr'24, the macro-sector of semi-durable and non-durable consumer goods (+4.1%) recorded a higher figure than the industry's total (+3.5%) and that intermediate goods (+3.2%) are not far behind, indicating a relatively balanced composition of industrial dynamism in early 2024.

The full text is available in Portuguese.