In the first half of 2024, the performance of the manufacturing industry was positive from the point of view of both value added (+2.6%) and volume of physical production (+2.7%), with gains in speed since the turn of the year. This Letter IEDI analyzes the recent results, according to the technological intensity of the industrial branches.

The IEDI periodically breaks down the evolution of our manufacturing industry by technology intensity groups, according to the methodology disseminated by the OECD. The sector is divided into four ranges: high, medium-high, medium and medium-low technology; none of its branches are classified as low technology, category that includes extractive activities.

Although manufacturing as a whole expanded in Q1'24 and Q2'24, this positive dynamism spread to all technology intensity groups only in the latter period. In Q1'24, it had been concentrated in the medium-low technology range. 

That is, the positive sign that was the exception became the rule among the four categories in Q2'24.

For all of them, the result of Apr–Jun'24 was strong enough to lift them from the red in the first half of the year, although in one case, medium technology, it barely surpassed the line of stability. 

In Q2'24, manufacturing output increased by 3.9% compared to the same period of the previous year, versus 1.4% in Q1'24. The branches of greater technological intensity advanced more than this aggregate result, ceasing to be those pulling down industrial performance.

High technology registered the most significant variation: 9.3%, more than offsetting the 5.4% drop of Q1'24. Medium-high technology, in turn, grew 5.9% compared to -1.4% in the previous quarter, always in the year-on-year comparison. 

The medium technology intensity industry also reversed its sign, but continued to be in virtual stability: +0.7% in Q2'24 against -0.2% in Q1'24. Medium-low technology was the only branch to show a small deceleration, but it managed to remain at the same level of dynamism: 3.6% and 3.9%, respectively.

Thus, in the first half of the year, it was the medium-low range that continued to give robustness to the aggregate manufacturing performance. This group registered an increase of 3.7% compared to Jan–Jun'23, with furniture, wood, paper and cellulose (+5.1%) and food (+4.5%) as its main propellers.

All other ranges grew below the aggregate rate, but the medium-high industry stood out for having the second best result. Its increase was of 2.4% in the 1st half of 2024, driven mainly by the automotive sector (+4.9%), but also by machinery and electrical equipment (+10.0%). Chemicals and machinery and equipment failed to grow.

Next, we have high technology, with an expansion of 1.9% in the first half of the year. Among its branches, the results were quite asymmetric. While the pharmaceutical industry shrank 5.9%, electronics advanced 8.4%, driven by production of radio, TV and communication equipment (+13.4%).

The industry of medium technology intensity grew the least. Its performance of only 0.3% in Jan–Jun'24 indicates a reaction in relation to the results of the first half of 2023 (-2.1%) and 2022 (-6.3%), but was greatly constrained by the metallurgy branch, which remained in the red (-0.6%). 

As is well known, metallurgy, which includes steel activities, is suffering strong competition from Chinese products that are no longer absorbed internally due to the country's economic slowdown. The requirements of local content and barriers to imports by developed countries to Chinese steel have also aggravated the competitive situation.

The full text is available in Portuguese.