The first half of the year ended with a significant increase in Brazilian industrial output: +4.1% from May'24 to June'24, after adjusting for seasonal effects. It was the best result of the series since Jul'20 and more than offset the decline of the two previous months.

Growth was relatively widespread: 64% of the branches followed by the IBGE and 53% of the regional parks of the sector had advances in production. But despite this, much of the magnitude of the result was due to the resumption of production in the south of the country.

After the initial shock of the floods in Rio Grande Sul, which led its industrial production to shrink 26.3% in May'24, the state registered an increase of 34.9% in June'24, after adjusting for seasonal effects. 

The weight of this factor for the Jun'24 figure is reinforced by the fact that industrial branches with an important presence in Rio Grande do Sul (RS) led the national expansion, such as production of tobacco (+19.8%), chemicals (+6.5%) and metallurgy (+5.0%).

The IBGE points out, however, that production of petroleum derivatives and biofuels were responsible for the largest positive contributions in Jun'24. In this sense, it should be noted that, in previous months, Petrobras had reported technical shutdowns in some of its refineries, reducing the bases of comparison and helping to obtain a positive rate in Jun'24. Ethanol production also stood out.

Despite short-term fluctuations and the prospect of deceleration following the interruption of cuts in the base interest rate (Selic), the industry's performance remained favorable compared to last year. For the sector as a whole, the increase already seen in Q4'23 gained strength in 2024, at least for now.

All industrial macro-sectors registered output increases in Q2'24 versus to Q2'23. The leadership fell to capital goods, whose bases of comparison remain very depressed. It rose 11.7%, the first positive quarterly rate since Apr–Jun'22.

Three groups of capital goods grew in the period: those for the industry itself, with +8.5%, something that had not occurred since Q3'21, mixed-use capital goods, with +18.2%, and capital goods for transportation, whose expansion of +18.8% was the strongest.

Consumer goods also fared well, reflecting the improvement in employment and income but also more modest bases of comparison in the case of durables. Production of semi and non-durable goods increased 6.4%, the best result since Q2'21, and that of durable goods rose +7.7% supported by household appliances (+27.3%) and furniture (+9.0%). Production of vehicles and auto parts fell 1.4%.

Intermediate goods, in turn, were the only macro-sector to lose momentum in Q2'24, registering +1% after advancing around +2.5% in the previous two quarters. Two branches explain this loss of dynamism: oil derivatives (-2.6% compared to Q2'23) and steel (-1.8%), in the latter case under the influence not only of the RS floods, but also of the heavy competitive pressure of Chinese steel at very low prices in the global market.

For the beginning of the second half of this year, short-term signs are positive. The confidence of manufacturing entrepreneurs registered, in Jul'24, the highest level in the FGV indicator since Nov'21 and remained in the optimistic region according to the CNI indicator, despite a certain accommodation. The Manufacturing Purchasing Managers’ Index (PMI) for Brazil also progressed in Jul'24, indicating an improvement in the sector's business situation.

In addition, surveys carried out by the CNI show that the level of inventories in the general industry, but also in the extractive sector and in manufacturing, fell again in Jun'24, making room for greater production in order to replenish them. As did the sector in aggregate, 72% of manufacturing branches assessed their inventories as below planned levels in Jun'24.

The full text is available in Portuguese.