In Sep'24, the industry, retail trade and services grew, after weak results in the previous two months. This gives positive signs for GDP in Q3'24 and, it seems, the highlight is industrial dynamism.

From Aug'24 to Sep'24, industrial output increased 1.1%, after seasonal adjustment, with manufacturing leading the way (+1.7%). Retail sales varied 0.5%, but when the branches of vehicles, auto parts, construction material and wholesale are included, retail expansion reached 1.8%. As for services, real revenue grew 1.0% in the seasonally adjusted series.

Thus, the Central Bank estimates, through its IBC-Br indicator, that the country's economic dynamism, seasonally adjusted, accelerated from 0.24% in Aug'24 to 0.84% in Sep'24. Taking Q3'24 as a whole, the expansion was of 1.1% in relation to Q2'24, also with seasonal adjustment.

In this case, industrial production was the most robust: 1.6% in Q3'24 compared to the previous quarter, with adjustment. That is, double the result of Q2'24, which was of 0.8%. Services grew 1.3% and broad retail rose 1.0% from Q2 to Q3'24. In all cases, there was a gain in speed.

In contrast to a year ago, there were also gains in the pace of growth of the major economic sectors and, once more, it was the industry that showed the best trajectory of upward growth rates.

Industrial output, in relation to the same period of the previous year, went from an increase of 2.0% in Jan–Mar'24 to 3.9% in Jul–Sep'24, that is, practically double the previous rate. The most intense progress was seen in capital goods, which went from -1.6% in Q1'24 to 11.9% in Q3'24. In the same period, production of durable consumer goods changed from 0.9% to 16.4%.

Real revenue in the services sector, in turn, increased from 2.5% in Jan–Mar'24 to 3.3% in Jul–Sep'24, supported mainly by the information and communication sector, while the volume of broad retail sales, after some moderation in Q2'24, returned to the level of expansion seen early in the year: 4.6% in Jan–Mar'24 and 4.8% in Jul–Sep'24. The 15.3% increase in sales of vehicles and auto parts was decisive for this retail performance in Q3'24.

Given these developments, considering the performance of the Central Bank's IBC-Br indicator, which acts as a proxy for GDP, the country's level of economic activity is likely to have strengthened in Q3'24 when compared to the same period last year. This indicator registered an increase of 4.7% in Jul–Sep'24 versus 3.3% in Apr–Jun'24.

Due to the characteristics of the industry, its leadership in recent growth contributes to: creating feedback effects, given its sectoral interrelationships; giving impetus to formal employment, since most of its labor force is formal; and enhancing tax collection, due to its higher tax burden than other sectors'.

The issue is how long the industrial expansion we have seen will persist. This question arises because the cycle of increase in the base interest rate, Selic, started in Sep'24 and intensified in Nov'24, tends to weaken consumption of durable goods, also damaging retail, and discouraging productive investment decisions.

However, in addition to the time it takes for Selic increases to be passed on to loan interest rates, some factors may initially mitigate the negative effects of this process. This is the case, for example, of the super-accelerated depreciation program. The heated labor market and the income transfer programs should also help stimulate demand for some time.

The full text is available in Portuguese.