In May'24, the country's level of economic activity continued to expand, despite the slowdown in markets for goods more sensitive to credit and interest rates and the negative effects of the environmental disaster in Rio Grande do Sul.

The Central Bank's IBC-Br indicator, which acts as a proxy for GDP, registered +0.25% from Apr'24 to May'24, after the elimination of seasonal effects. That is, the pace was practically the same as in the previous month (+0.26%), but this time with a higher dynamism in retail trade, compensating for the decline in the industry and the slowdown in services.

Still in the seasonally adjusted series, industrial production registered -0.9% in May'24, repeating the result of Apr'24 (-0.8%), but now with a drop in manufacturing (-2.2%). Services declined from +0.3% in Apr'24 to 0% in May'24, while real sales in broad retail, which includes the branches of vehicles, auto parts and construction material, accelerated from -0.8% to +0.8%, respectively.

Retail growth was happened with a decline in half of its branches, especially those most dependent on financing: -1.2% in furniture and household appliances, -2.3% in vehicles and auto parts, -3.5% in construction material and -8.5% in office, computer and communication equipment. As retail is an important outlet for the production of goods, this behavior was also reflected in the industry.

In May'24, all industrial macro-sectors lost output, but the falls were more intense for those that had been driving growth at the beginning of the year: -5.7% in durable consumer goods and -2.7% in capital goods, after seasonal adjustment. Both cases are also more sensitive to interest rates and credit conditions.

Regionally, 60% of industrial parks were in the red (compared to 33% in Apr'24), and the decline in Rio Grande do Sul's production reached -26.2% in the seasonally adjusted series and -22.7% in comparison with May'23, with double-digit drops in practically all branches.

In services, the stability of May'24 interrupted two consecutive months of expansion and most branches registered losses. Those that grew did not always compensate for previous adverse results. The three branches in the red in the seasonally adjusted series were: information and communication (-1.1%), transport (-1.6%) and other services (-1.6%).

Thus, the trend of convergence of services towards the performance of the other sectors continued. This is seen in the 12 month-figure, which decelerated from +11.7% in May'22 to +6.4% in May'23 and then to +1.3% in May'24. With this last result, services are at the same pace as the general industry (+1.3%), but below retail (+3.7% in its broad concept). 

Comparing the results of Jan–May'23 and Jan–May'24, services are also the only sector to show a slowdown (from +4.8% to +2%), while industry (from -0.3% to +2.5%) and retail (from -0.3% to +3.7%) gained strength. It is worth noting, however, that the level of services real revenue is the one that most exceeds pre-COVID-19 numbers (+12.7% against Feb'20) and so some accommodation was expected. 

In the case of the industry, the expansion of Jan–May'24, +2.5% compared to the same period of the previous year, was driven by 76% of its branches and 83% of its regional parks. Only 3 local industries were negative in Jan–May'24: Rio Grande do Sul (-1.1%), under the effect of the floods, Pará (-1.6%) and Mato Grosso do Sul (-0.1%).

In contrast to the performance of Jan–May'23, 2024 brought improvement to 78% of regional industrial parks. São Paulo, which has the largest and most diversified park in the country, reversed the 2.4% decrease of Jan–May'23 into growth of +3.6% in Jan–May'24, thus being well above the result for Brazil as a whole. 

In retail, the branches whose sales expanded in Jan–May'24 represented 72.7% of the total and those that reported figures higher than in the same period of 2023 amounted to 63.6% of all branches. In its narrow concept, the increase was of +5.6%, that is, four times more than in Jan–May'23 (+1.4%), and in its broad concept, +4.8%, also higher than the performance of the same period last year (+1.6%).

In turn, the main factor driving the accommodation of services in 2024 has been the field of transport, its auxiliaries and postal services, more directly related to the level of economic activity, but also more vulnerable to the effects of the climate disaster in Rio Grande do Sul— although, as observed by the IBGE, there are difficulties in identifying prices and, consequently, in obtaining accurate information about services real revenue in the state. 

Among the components of transport services, there was a general loss of dynamism, but this occurred more strongly in those activities that had not been doing well since the beginning of the year: air transport (-7.4% against Jan–May'23) and storage, transport auxiliaries and postal services (-5.1%). Ground transport shrank 0.8%.

The full text is available in Portuguese.