According to the latest data from UNIDO (United Nations Industrial Development Organization), the strong pace of growth of world manufacturing, registered at the end of the first half of 2024, was interrupted in Q3'24. In Brazil, in turn, the sector continued to accelerate and its advantage over the global total expanded. 

Global manufacturing output registered +0.4% in Q3'24, less than half the result of Q2'24 (+0.9%), considering the comparison with the immediately preceding period, after adjusting for seasonal effects.

Compared to the same quarter last year, the sector once more did not show a gain in speed, but at least it did not slow down either. The result of 2.3% in Q3'24 was the same of Q2'24, remaining above the pace registered at the turn of the year (+1.5%).

The drags on the world industry were the developed economies of the Northern Hemisphere. There was a drop in production in Europe and North America, as well as in the set of high-income industrialized countries when comparing Q3'24 to Q2'24, which was reflected in a slowdown in the year-on-year rate (Q3'24 versus Q3'23).

It is worth noting that, although positive and above the global total, the industry in China has also lost momentum. In contrast to the previous quarter, it decelerated from 1.5% to 1.1% from Q2 to Q3'24. Compared to the previous year, it went from 6.6% to 5.9%, preserving a level of performance much higher than the registered in most of 2023.

Sectorally, it were the branches of lower technological intensity that pulled the global industry down, under the influence, for example, of the virtual stagnation in food (+0.3% against Q2'24) and the drop in beverages (-0.5%). The medium-high and high technology industries, on the other hand, grew ahead of the global total: +1.0% compared to Q2'24, with the help of computers and electronics (+2.1%) and pharmaceuticals (+2.6%).

In contrast, among the growth leaders were the middle-income industrialized countries except China, whose production gained strength from Q2'24 (+0.3%) to Q3'24 (+0.8%) and was resilient (+1.7%) in relation to last year.

From a regional point of view, the biggest positive highlight was manufacturing in Latin America and the Caribbean, which, after four consecutive falls, increased 1.7% between Q2'24 and Q3'24, with seasonal adjustment. Thus, it took the lead in global industrial expansion in the last quarter. In relation to the same period of the previous year, in turn, it was the region's first positive rate (+1.1%) after five drops.

Although it was not the only country whose industrial production rose, this performance in Latin America is largely explained by the good evolution of the sector in Brazil, which is the largest economy in the region. Our manufacturing industry was able to reverse a 1.0% decrease in Q3'23 into a 4.6% expansion in Q3'24, when taking the year-on-year comparison, with seasonal adjustment. 

In other words, the pace of progress of our industry was twice as fast as that of the world total (+2.3%) and just over four times above the result of Latin America and the Caribbean in aggregate (+1.1%).

UNIDO highlights the performance of other important industrial parks in the region, but which, even so, had a much lower performance than Brazil, such as the +0.9% increase in Mexico. In Argentina, there was a decline (-7.6%), but not at double digits as had been happening. 

It is also important to note that the advantage of Brazilian industrial performance in relation to the world total has increased significantly. In Q1'24, the pace of growth of Brazil's manufacturing was 0.3 percentage point above the global total, rising to 0.4 p.p. in Q2'24 and then to 2.3 p.p. in Q3'24, taking annual comparisons.

It is also worth noting that all these variations present seasonal adjustment, as computed by UNIDO, while the IBGE in general calculates the interannual changes from data without seasonal adjustment. Therefore, it may be that the reader finds small deviations from the data published on the IBGE website.

Another highlight was the performance of the branches of greater technological intensity, which in the world have been ahead of manufacturing as a whole, as mentioned above, with the same happening in Brazil. In fact, this is a mark of the 2024 industrial evolution in the country.

This is shown by the work carried out by the IEDI based on IBGE data, which was addressed in detail in Letter IEDI n. 1296 "The reaction of the high-tech industry."

In Q3'24, the high and medium-high technology industry registered an expansion of 9.4%, according to the IEDI analyses, more than double the result of the national manufacturing industry. It is a very different reality from late 2023, when there was a 17.3% drop in relation to the same period of the previous year.

Throughout 2024, Brazilian industrial output has followed a path of steady acceleration, favored by the previous phase of interest rate cuts and the consequent improvement in credit conditions. This factor, added to the strengthening of BNDES' performance towards innovation, digitalization and sustainability, boosted the production of capital goods and durable consumer goods, which have many activities classified as high and medium-high technology.

Government income transfer programs and the resumption of investments, notably private ones in infrastructure, also stimulated the demand for industrial goods. In addition, the devaluation of the real contributed to channel demand to domestic production, even though the competitive pressure from imports has been intense in some sectors.

The worrying aspect is that the new phase of monetary policy at the Central Bank of Brazil, which has already signaled new and steeper increases, tends to depress industrial performance in the country, with the risk of putting a stop to the beginning of the recovery that we are witnessing. 

At least initially, this effect can be counterbalanced by the super-accelerated depreciation program, by the reinforcement of BNDES funding through the LCDs, and by the fact that the labor market takes some time to feel the effects of the economic slowdown that higher interest rates should cause. 

In any case, it is likely to reduce the growth differential of our industry in relation the world industry, given that international interest rates have not reversed their trend, although smaller cuts are expected in the US, due to potential inflationary effects of the Trump administration's protectionist policies. And all this despite the disorganization of global industrial chains expected if the tariffs increase is large and expressive.

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