In the first quarter of 2025, manufacturing drove the positive performance of the Brazilian industry, as extractive activities underperformed. However, this did not prevent a notable loss of momentum compared to the end of the previous year.

The physical production of the manufacturing industry dropped from 4.6% in Q4 2024 to 2.5% in Q1 2025, compared to 1.9% for the general industry, as discussed in Letter IEDI No. 1313, “Loss of Industrial Momentum,” dated May 13, 2025.

Today’s Letter IEDI analyzes this performance from the perspective of the technological intensity of industrial sectors, following the methodology disseminated by the OECD. This is an exercise that few undertake regularly, as the IEDI does.

The manufacturing industry is classified into four groups or ranges based on technological intensity: high and medium-high technology, which generally have longer production chains, are more R&D-intensive, and tend to be more integrated with sophisticated service activities; and medium and medium-low technology, which are more closely related to primary goods, where economies of scale are more significant, and where Brazil tends to exhibit greater competitiveness.

In summary, in Q1 2025, the groups with higher technological intensity experienced the most significant slowdown, although they maintained a performance above the average of manufacturing. In the case of medium-high technology, some sectors showed resilience, such as machinery and equipment and chemicals, aided by depressed comparison bases.

The medium-low technology group stood out as the only one in which the recent loss of dynamism led to a decline in output. The situation was very close to stability, but it is noteworthy that this group had not shown a negative result since early 2022.

In the high-technology industry, the drop from a 15% growth rate in Q4 2024 to just 1.9% in Q1 2025 was mainly driven by the performance of electronics, which went from double-digit growth between Q2 2024 and Q4 2024 to a rate of -2.2% at the start of 2025.

In the medium-high technology group, which also grew by more than 10% in the second half of 2024, the loss of momentum was slightly less intense than in the previous case, recording 7.9% in Jan–Mar 2025 compared to the same period the previous year.

As mentioned earlier, some sectors helped mitigate a larger loss in the medium-high technology group: machinery and equipment rose from 10.1% in Q4 2024 to 12% in Q1 2025, while chemicals only decelerated only slightly, from 6.6% to 5.2%. The automotive and the electrical machinery and equipment sectors experienced greater deceleration.

In the medium-technology group, the result in Q1 2025 was +3.9%, compared to +5.7% in Q4 2024. It was a weak quarter, particularly for rubber and plastics (+1.9%) and non-metallic minerals (+2.4%). Metallurgy (+4.7%), a significant sector in this group, ensured a milder slowdown.

Finally, the medium-low technology industry had already approached stability in the last quarter of 2024, recording just +0.5%. However, with the continued loss of momentum at the start of this year, it registered -0.2% in Jan–Mar 2025. Three of its sectors were in the red: food, beverages, and tobacco (-0.3%), wood, furniture, and paper and pulp (-1.4%), and coke, petroleum derivatives, and biofuels (-2.5%).

The full text is available in Portuguese