Letter IEDI n. 1234—Smaller deficit, but with lower exports
In 2023, the manufacturing trade deficit has been falling in relation to last year and quarter after quarter this movement gains strength. The reason behind this, however, is not the expansion of the sector's foreign sales, but rather a significant contraction in imports.
Between Jan'23 and Sep'23, the deficit of the Brazilian manufacturing industry totaled US$32.69 billion, representing a 30.2% drop against the same period last year. In Q3'23, this rate reached -47.0%, driven by a 18.9% decline in imports, which more than offset the sector's 7.8% drop in exports.
Today's Letter IEDI evaluates the foreign trade flows of our industry based on the OECD methodology, which groups its different branches by technology intensity: high, medium-high, medium and medium-low technology. There are no manufacturing branches in the low technology intensity category.
In the most recent data, which indicate a strong reduction in the industrial deficit in Q3'23, two factors stand out: a decline in the negative balance of the branches of greater technology intensity and an expansion of the surplus of the medium-low technology range. These two movements offset the 57.1% decrease in the positive balance of the medium technology intensity industry.
Among the four groups into which manufacturing is divided, the largest contribution came from the medium-high range, whose deficit in Q3'23, amounting to US$17 billion, shrank 30.9% compared to Q3'22. The reason for this was the 22.6% drop of its imports, due to chemicals (-40.5%) as well as electrical and mechanical machinery and equipment, which came very close to stability. Exports in this range registered -5.0% compared to Jul–Sep'22.
Then, the second largest contribution to reducing the trade deficit of the manufacturing industry came from the medium-low technology intensity group, whose balance is positive (US$15.2 billion in Q3'23) and grew in the period: +20.7% against Q3'22. In this case, given that its exports fell 7.6%, it was also imports that set the tone: -28.3%, due to all of its components, especially petroleum products (-43.9%).
The high-tech industry, on the other hand, reduced its deficit by 8% in Q3'23, giving continuity to the movement of previous quarters (-1.5% in Jan–Mar'23 and -3.4% in Apr–Jun'23). Its exports were close to stability (-0.6% versus Q3'22), but lost much of the recent dynamism (+22.1% in Q2'23), due to all of its branches. Imports fell 7.1%, greatly influenced by the decline in foreign purchases of electronic products (-14.1%).
Finally, the only category that went in the opposite direction—thus concurring to a higher manufacturing deficit—was the medium technology intensity range. In this case, its surplus shrank 57.1% in Q3'23, almost twice the pace of Q2'23 (-26.8%). This happened because its exports fell 19.5% and imports rose 3.1%, mainly due to metallurgy, which suffered a 20.7% drop in its foreign sales and a 8.7% increase in its foreign purchases.