After the Brazilian GDP surprised positively and grew 1.4% in Q2'24, driven by the pair investment-industry, the level of economic activity lost strength in July, under the adverse impact of "extra economic" factors in the industry and a retail slowdown.

After adjusting for seasonal effects, industrial output shrank 1.2% from Jun'24 to Jul'24 and real sales of broad retail, which includes the branches of vehicles, auto parts, construction material and wholesale-retail, registered only +0.1%. Services grew more, +1.2%, but still fell short of the result of Jun'24 (+1.7%).

As a consequence, the Central Bank's IBC-Br indicator, which acts as a proxy for GDP, fell 0.4% in Jul'24, after an increase of 1.4% in the previous month. This was the second negative rate recorded by the indicator in 2024.

In the industry, food (-3.8%) and biofuels and petroleum products (-3.9%) were the branches that fell the most, largely due to sugar and ethanol production, hampered by the severe drought. Scheduled shutdowns of production units also contributed to the decline in extractive activities and in petroleum products, as well as in paper and pulp.

In all, only 28% of the branches and two of the four industrial macro-sectors registered losses. Regionally, the number of industrial parks in the red was also a minority. Of the 15 parks monitored by the IBGE, only 3 lost production from Jun'24 to Jul'24. São Paulo's industry is in this minority group, which was to be expected since the drought has hampered the performance of its sugar and alcohol industry.

For now, the bumps in the short-term path, as in Jul'24, do not put in check the performance of the industry in 2024, which is still much better than that of the first months of last year: a 3.2% rise in the year to Jul'24 against -0.5% in Jan–Jul'23. But there are obstacles on the horizon, such as the new phase of rising interest rates, which harm the fastest-growing macro-sectors: capital goods (+6.8% in Jan–Jul'24) and durable consumer goods (+8.1%).

Retail, although running out of steam, has avoided the negative ground. In Jul'24, a minority of 40% of its branches failed to grow, the worst case being pharmaceutical and pharma-chemical products (-1.5%, with adjustment), followed by fuels and lubricants (-1.1%). Two other branches were virtually stagnant: construction material (-0.2%) and books, newspapers and stationery (+0.1%).

Thus, as in the industry, this development does not compromise 2024 as a year of a more intense expansion, but the new phase of interest rate hikes by the Central Bank is a risk factor for retail, too. In Jan–Jul'24, broad retail registered +4.7%, the same pace of the moving quarter ended in Jul'24, always in the year-on-year comparison. In Jan–Jul'23, it recorded +2.1%.

This movement has received important influence from branches whose markets respond more directly to current employment and income, such as supermarkets, food, beverages and tobacco (from +2.7% in Jan–Jul'23 to +5.6% in Jan–Jul'24), but it has also been essential to boost branches with markets dependent on credit and interests.

This is the case of the vehicle and auto parts industry, which accounted for 51% of the rise in broad retail sales in Jan–Jul'24. In addition to being a branch with great weight in retail, its increase is also significant in 2024: +13.4% in the year to July, that is, more than double the result of Jan–Jul'23 (+6%).

Services, after oscillating around stability between Dec'23 and May'24, showed a higher pace of growth in the last two months, a period in which it accumulated a gain of 2.9%, free of seasonal effects. In Jul'24, the increase was of 1.2%, with a positive sign in three of its five branches.

Two branches were important for the result of both Jul'24 and Jun'24: information and communication services (respectively +2.2% and +1.6%, with adjustment) and professional, administrative and complementary services (+4.2% and +2.2%). Another branch expanding in Jul'24 was "other services" (+0.2%), which brings together a diverse set of activities.

In Jan–Jul'24 versus the same period of the previous year, services' real revenue rose 1.8% and a single segment was in the red:  transport, its auxiliaries and postal services (-3.1%). In Jan–Jul'23, the sector as a whole had registered +0.8%, with a drop in two of its branches.

Versão em português deste texto.