Letter IEDI n. 1231—World industrial stagnation
The latest quarterly report published by the United Nations Industrial Development Organization (UNIDO) shows that the world's industry has finished the first half of 2023 in a state of stagnation.
In Q2'23, as in Q1'23, global manufacturing output registered -0.1% in relation to the previous quarter, after seasonal adjustment. Together, these two quarters canceled out the little the sector had grown in the final quarter of last year (+0.2% in Q4'22).
Compared to the same period of 2022, global manufacturing recorded a positive growth rate, which reached +1.8% in Q2'23 after the virtual stagnation of Q1'23 (+0.1%). But this improvement in the year-on-year comparison is basically due to a statistical effect.
In Q2'22, an additional wave of contagion by COVID-19 and the then zero-tolerance policy of the Chinese government harmed the performance of the industry in China; this generated a very low basis of comparison, which helped in obtaining a 6.8% increase in Q2'23.
High-income industrialized economies are still the main brake on global industrial production, although the situation is not necessarily exemplary in other countries.
Compared to the immediately preceding period, manufacturing in high-income industrialized economies was flat: 0%, seasonally adjusted, after two consecutive quarters of decline. Strictly speaking, there has been no industrial growth in this group of countries since the beginning of 2022, when the war in Ukraine broke out. In relation to the same period of the previous year, the sign was again negative: -1.5%.
From a regional point of view, the evolution of these countries leads to industrial weakness in both Europe and North America. Industrial production in Europe contracted once again from Q1'23 to Q2'23: -0.4%, seasonally adjusted, consisting of the worst result among the regions identified by UNIDO.
In North America, it cannot be said that there was industrial expansion, but at least the negative terrain was avoided, with +0.2% in relation to the previous quarter; that is, an improvement compared to previous periods: 0% in Q1'23; -0.9% in Q4'22 and 0% in Q3'22, always with sazonal adjustment.
In the group of middle-income industrialized countries, excluding China, manufacturing output in Q2'23 gained some strength, but was up only 0.7% against Q1'23. Although low, this result was the best since Q1'22. In the year-on-year comparison, the figure was also +0.7%, but in this case it exceeded only the 0.2% decrease of the previous quarter.
Although the number of countries in this group is large, the regional analysis suggests that the recent acceleration did not come from Latin America and the Caribbean, whose manufacturing production varied only +0.1% compared to Q1'23 and decreased 0.7% in relation to Q2'22, largely due to Brazil.
It is worth remembering that, except for the period immediate after the first COVID-19 shock in 2020 when a set of measures was adopted by the government to support economic activity, Brazilian manufacturing has not managed to grow in a while.
Since the second half of 2021, when the bases of comparison ceased to be so favorable, Brazil's figures have been below those of the world industry. The gap remained in Q2'23 in relation to Q2'22, when our manufacturing output fell 1.5% versus the 1.8% global increase, as previously mentioned. At the margin, we are also stagnated.
With this result, the Brazilian industry was the 68th in Q2'23 in the ranking of 112 countries built by the IEDI from UNIDO's quarterly database. In the previous quarter, Brazil had been in the 64th position.
A prominent factor behind the difference in performance of the manufacturing industry in Brazil and the World concerns the branches of greater technological intensity. UNIDO calls attention to the leadership of high and medium-high technology in Q2'23, whose production increased 3.5% compared to Q2'22—that is, double the industrial aggregate in the period—driven by the automotive and electrical equipment sector.
In Brazil, as shown in Letter IEDI n. 1225, the high and medium-high technological intensity manufacturing industry decreased, together, 6.4% in Q2'23 in relation to the same period of the previous year, notably driven by the medium-high range (-7.6%)—due precisely to activities that grew in the world, such as vehicles (-3.3%), machinery and equipment (-8.2%) and electrical machinery and appliances (-14.7%), among other branches.