In 2024, the Brazilian industry not only grew, but also showed a relatively robust and widespread result across its branches. It was the first time in the last decade that the sector's expansion did not rely on a heavily depressed basis, as had occurred in 2017 after the 2016 slump and in 2021 after the 2020 COVID-19 shock.

The problem is that this dynamism may not continue, at least not at the same intensity and magnitude as seen in 2024. The fourth quarter of 2024 already brought signs of more difficult times, pointing to an early deceleration, due to adverse weather events, rising interest rates, increased uncertainties and exchange rate volatility.

In 2024, production of the general industry advanced 3.1%, implying a significant acceleration compared to the virtual stability registered in 2023 (+0.1%). In the case of manufacturing, that is, excluding extractive activities, progress was even more marked, from a 1.1% decline in 2023 to a 3.7% expansion in 2024.

This acceleration was led by the macro-sectors of durable consumer goods and capital goods, whose output grew 10.6% and 9.1%, respectively. In the first case, the pace of growth increased tenfold between 2023 and 2024 and in the second case there was an important sign reversal, since in 2023 it had decreased 11.7%.

In capital goods, whose production is driven by investment decisions, the most substantial improvement was in capital goods for transport, from -15.8% in 2023 to 18.2% in 2024, but two other branches did not lag behind: capital goods for the industry itself, which after falling -8.9% in 2022 and -7.0% in 2023 advanced 8.2% in 2024, and mixed capital goods, which from -0.4% and -8.0% rose to 19.4%, respectively.

The other macro-sectors also grew. Semi-durable and non-durable consumer goods showed resilience, even with their commodity processing branches subject to adverse climate impacts, growing 2.4% in 2024 after rising 2.0% in 2023. Intermediate goods, favored by the widespread industrial dynamism, accelerated from 0.4% to 2.5% in the period.

Among the different branches monitored by the IBGE, 80% expanded in 2024. The IEDI also follows more granular categories, building a ranking with 90 industrial activities. 

In this case, 72% of them were in the black, with 16% showing double-digit growth rates and half doing better than the general industry aggregate, that is, growing above 3.1%. Of the 90 activities, 28% were in the red, but for most of them Q4'24 brought some reaction. Taking the activities with negative results in 2024, 60% returned to growth in the last quarter of the year.

In 2024, the part of the industry most sensitive to interest rates and credit conditions grew the most. Among the macro-sectors, capital goods and durable consumer goods, as mentioned above. Among the activities in the more granular classification, the highlights were trucks and buses (+48.6%), household appliances (+31.5%), communication equipment (+25.9%), electronic components (+20.3%), stoves, refrigerators and washing machines (+18.6%), etc.

For this reason, in addition to more systemic factors, the recent increase in interest rates in the country should take a heavy toll on industrial dynamism this year. And we can already see signs of this in the data for late 2024: -0.2% in Oct'24, -0.7% in Nov'24 and -0.3% in Dec'24, seasonally adjusted. As a result, the growth registered in Aug–Sep'24 was eliminated. The branches in the red in this more short-term comparison went from 24% of the total in Oct'24 to 60% in Dec'24, after reaching 80% in Nov'24. 

Thus, the industry made no progress in the last quarter of the year and had the lower bases of comparison in 2023 to show some resilience in the year as a whole. Compared to the immediately preceding quarter, with seasonal adjustment, it decelerated from +1.2% in Q3'24 to +0.1% in Q4'24. In relation to the same period in 2023, it went from +3.9% in Q3'24 to +3.1% in Q4'24.

The impacts of this are reflected in industrial entrepreneurs' confidence indicators. In Jan'25, the CNI indicator fell below the 50-point neutrality mark for the first time since May'23. The FGV index also fell from Dec'24 to Jan'25 and was in the region of pessimism.

However, there are some factors that can act as mitigators, at least for some time, as we have observed in our analyzes. 

Among them are: a favorable projection for the agricultural crop, which not only mobilizes the agri-food industry, but can also mitigate inflationary food pressures; the super-accelerated depreciation program, which tends to favor investment decisions; the creation of LCD, which strengthen BNDES funding and enable new disbursements for strategic areas, such as infrastructure and innovation. The heated labor market, which tends to take a while to reflect the economic slowdown, also helps.

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