Letter IEDI n. 1015–A crisis for all sectors
After historic losses in April, figures for many activities turned positive in May 2020, partially offsetting the previous setbacks. This was the case of the industry, which adopted sanitary protocols to enable the reconnection of production lines and units, and of retail trade, which could count not only on sectors considered essential but also on digital sales channels. Services, in turn, remained in the red.
In May/20 versus the previous month (after discounting seasonal effects), industrial output rose +7% and real retail sales increased +19.6% in its broad concept, that is, including vehicles, auto parts and construction material. The service sector recorded a further drop in real sales, -0.9%, although less intense than in April. These are results that, together, can guarantee a positive May for GDP.
None of this, however, signals an exit from the COVID-19 crisis. First, because the pandemic has not yet been fully controlled, following its path towards the interior of the country, and there are risks of further outbreaks arising from measures to ease social isolation. Second, because, despite May's results, the losses remain significant and add up to those of the 2015–16 crisis, making recovery a challenging process.
Compared to a year ago, all three major sectors of the economy remained in the red. The industry fell 21.9%, services 19.5% and broad retail 14.9%. It is worth remembering that services were the last sector to come out of the 2015–16 crisis and their first year of growth was 2019, with a mere 1% increase in Jan–Dec. As the sector is very labor intensive, such performance limits the reaction of employment in the country.
In turn, the comparison of the activity level of May/20 with that of Feb/20—that is, before the negative impact of COVID-19—gives the dimension of the recent decline: -21.2% in the industry, -18.8% in services and -15.1% in broad retail. This also shows that the pandemic has intense and widespread effects, impacting all sectors, those more directly affected by isolation and those not.
Among the activities most affected by the pandemic, the leading place is disputed very closely by branches of the industry, retail and services. According to IBGE data, the biggest drop in May/20 compared to Feb/20 (in the series without seasonal effects) was registered by air transport: -78.6%, a rate that indicates that the operations of this branch of services were practically paralyzed by the pandemic.
In second came the durable consumer goods industry, with a decrease of 69.5% in the same comparison. In these branches, the problems were already present before March, when social isolation was imposed in many Brazilian cities, due to disruptions in access to imported inputs, parts and components. With the deterioration of the health situation in the country, the fear of unemployment and loss of income and the worsening of financing conditions depressed the demand for these goods.
Then came the special aggregate of tourist services, with -66%, and real retail sales of fabrics, clothing and footwear, -64.1%, given that stores were closed and online sales tend to be restricted by current consumption habits that demand physical presence. The articles sold by this segment are also part of the set of goods whose consumption families usually quickly interrupt in times of uncertainty and fear of unemployment.
In addition to these, countless other activities registered significant double-digit declines, such as land transport (-24.1%), the capital goods industry (-36.1%), retail sales of vehicle and auto parts (-38.7%) and accommodation and food services (-62.2%).
In contrast, only one set of activities managed to stay in the blue. It was the retail branch of supermarkets, food, beverages and tobacco, given the essential character of these goods, the demand boost caused by social isolation, as well as the development of digital sales channels. As a result, in May/20 it was at a real revenue level 8% above that of Feb/20. At least for this branch, the crisis has not yet arrived..