Letter IEDI n. 1233—Industry: another quarter without progress
With the last release of the IBGE survey, we obtained data on the performance of the industry in Q3'23. As in previous months, the state of stagnation persists. From Aug'23 to Sep'23, the sector's output varied only 0.1%, after adjusting for seasonal effects, and in Q3'23 it registered 0% in relation to the same period last year.
The only positive point was to have avoided the negative rates that marked the first half of the year: -0.4% in Q1'23 and -0.1% in Q2'23, always in relation to the same period of the previous year. That is, over time, the situation of paralysis in the sector became clear, after episodes of deep crisis such as in 2015-2020 and during the pandemic.
It is worth noting, however, the asymmetries hidden in the aggregate figure. First, if we exclude the extractive branch—that is, taking only the manufacturing industry—there was output contraction in all quarters of 2023 and this after the stagnation that marked 2022: -1.0% in Q1'23; -1.5% in Q2'23 and -1.1% in Q3'23.
Second, the share of branches in the red increased from 55.6% of the total in Q1'23 to 68% in Q3'23. The same also happened with the number of branches with double-digit falls, which was only 1 in Q1'23 (wood products) while in Q3'23 there were 4 of the 25 monitored by the IBGE in the red (electrical machines and appliances; vehicles; electronics and information technology; miscellaneous products).
As for the industrial macro-sectors, the negative highlights are those whose markets' dynamism requires some type of financing, either to households or companies, under adequate interest rates and terms conditions. The high interest rates still practiced in the country are a major obstacle to the growth of this part of the industry.
This is the case of capital goods, which draws attention due to the intensity of the falls. In Q3'23, the sector registered -14.1% against Q3'22. To give an idea of the severity of the situation, note that it is a rate that approaches difficult moments of the COVID-19 pandemic (-10% in Q3'20 and -38% in Q2'20).
Capital goods for energy (-29.3%), transport (-25.4%) and construction (-19.2%), that is, segments associated with infrastructure, led the fall in Q3'23, but it is worth noting the long sequence of declines in capital goods for the industry itself (-6.2%), which has already completed almost two years.
Durable consumer goods, in turn, stand out for having presented the most serious u-turn throughout 2023. The 9.0% increase in Q1'23 was reversed into a 1.1% decrease in Q3'23, driven by brown line appliances (-4.4%) and other appliances (-1.5%), as well as furniture (-7.1%).
It is important to note the ineffectiveness of the federal government's tax reduction program to boost the industrial production of vehicles so far. In the seasonally adjusted series, there was a non-negligible decline in Jul'23 (-6.8%) and Sep'23 (-4.1%) in the vehicles, trailers and bodies sector, which accumulated a contraction of 12.1% in Q3'23 compared to Q3'22. Taking only the passenger cars segment, the result is a virtual stagnation: +0.4% against Q3'22.
Among the macro-sectors in the black, intermediate goods did not avoid a slowdown: +0.7% in Q2'23 and +0.4% in Q3'23. At its origin are, notably, intermediaries of the automobile industry, which went from a decrease of 1.4% in Q2'23 to another of 16.6% in Q3'23, adding to the adverse situation of agricultural pesticides (-29.1%).
Finally, the exception was semi-durable and non-durable consumer goods, whose output not only rose but regained strength from Q2'23 (+0.1%) to Q3'23 (+2.1%). The main contributions came from growth in the meat sector (+8.2%) and in fuels (+10.1%), as well as the improvement in the beverage sector (+0.7% compared to -5.1% in Q2'23).
In addition to exports, the progress in employment—increasingly from a qualitative point of view, as seen in the PNAD/IBGE Analysis of Oct, 31st 2023—and the slowdown in inflation, even more intense in consumption of food at home, have favored the industrial production of semi-durable and non-durable consumer goods.
Given this sequence of results, the confidence of industrial entrepreneurship has been showing signs of weakening. In Oct'23, both FGV and CNI indicators showed a decline compared to September, with the assessment of current business at its weakest point. It is thus an indication that the industry continues with no progress.