In 2024, all major economic sectors expanded at a higher pace than in 2023. The industry made the most progress from one year to the next, although it was broad retail trade, which includes vehicles, auto parts, construction material and wholesale-retail (“atacarejo”), that grew the most last year.

Industrial output went from mere stability in 2023, when it registered 0.1%, to a 3.1% growth rate in 2024. It was the first time in a decade that the sector's expansion did not rely on a heavily depressed basis of comparison. Real services revenue practically repeated its result (2.9% in 2023 and 3.1% in 2024), while retail sales accelerated from 2.3% in 2023 to 4.1% in 2024.

Good results were widespread within each sector. In the industry, all four macro-sectors advanced, including capital goods (+9.1%), after two consecutive years of decline. The leadership fell to durable consumer goods (+10.6%). Performance was equally favorable among branches, with 80% of them expanding, and among the regional industrial areas, as out of the 18 monitored by the IBGE, only 1 did not grow (Espírito Santo).

In retail, which was another sector to gain strength in 2024, sales expanded in 78% of its branches, with emphasis on vehicles and auto parts (+11.7%) and pharmaceutical, perfumery and cosmetic articles (+14.2%). In services, 80% of the segments increased in Jan–Dec 2024, with emphasis on information and communication (+6.2%) and professional, administrative and complementary services (+6.2%).

The problem is that a slowdown is already approaching, as a result of the increase in the base interest rate, Selic, which has risen 2.75 percentage points since Sep'24, reaching 13.25% per year in Jan'25. The transmission of this increase to loan rates usually takes a few months, but the latest Central Bank statistics indicate that this process has already begun, as we discussed in Letter IEDI n. 1303.

As for the level of activity, the impact on production is already beginning to appear. Compared to the immediately previous month, discounting seasonal effects, the industry contracted in the last three months of 2024, registering a loss of 1.2% in the period. Retail and services, in turn, fell in Nov'24 and Dec'24, accumulating declines of 2.6% and 1.9%, respectively.

As a result of this loss of momentum, the Central Bank's IBC-Br indicator, which serves as a proxy for GDP, fell 0.9% since Sep'24. As a consequence, the dynamism observed in the first quarters of the year (+1.7% in Q1'24 and +1% in the following two quarters) gave way to stability (0%) in the transition from Q3 to Q4'24, after adjusting for seasonal effects.

Among other indicators that point to a weakening at the turn of the year is the confidence of economic agents. According to FGV surveys, consumer confidence fell three months in a row: -3.1% in Dec'24, -5.1% in Jan'25 and -2.6% in Feb'25, reaching the lowest level since Aug'22. On the other hand, business confidence, considering industry, retail, services and construction, registered -0.5% in Nov'24, -0.3% in Dec'24 and -1.8% in Jan'25.

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