Letter IEDI n. 878–Waiting for better days
Bearing in mind the performance of the main sectors of the economy in July, the second half of 2018 started with the left foot. There was a general decline, reaching -2.2% in the services sector, -0.4% in broad retail —which includes sales of automobiles, auto parts and construction material— and -0.2% in the industry, after seasonal adjustment.
Even though to some extent these results may still reflect reminiscent effects of May's truckers' standstill —such as the additional 4% drop in transportation services— the spread of negative rates among the different branches of the major economic sectors suggests causes less unique than that. In the industry, 10 of the 26 branches and 8 of the 15 areas surveyed by the IBGE were in the red. In retail trade, 7 of 10 branches and in services no less than 4 out of its 5 segments.
In addition to factors that have long penalized economic recovery —such as the high rates of unemployment— the increase in uncertainty and the decline in confidence with the proximity of the general elections may be gaining importance and undermining economic performance. Evidence of this is the significant drop in industrial production of capital goods (-6.2%) and the reduction in gross fixed capital formation calculated by the IPEA for July (-1.0%).
Slow and discontinuous economic reaction should also mark the second half of the year, making 2018 a period of "waiting for better days", which might only come in 2019. For now, advances have been very relative. In July, the industry's output level was 0.8% below that recorded in December last year and real retail sales were only 0.4% higher (0.7% in the broad concept). In the case of services, which is still experiencing a crisis, this comparison indicated a turnover 1.7% lower than the level of the end of 2017.
Regarding industrial performance in July, the most intense loss came from capital goods, down 6.2% from June/18, seasonally adjusted. It was followed by consumer durables (-0.4%) and semi- and non-durable consumer goods (-0.5%), which had already registered significant decreases in Q2. The exception was intermediate goods, which grew 1%.
Regionally, besides more than half of the areas being in the red, the most unfavorable aspect was that the industrial core in the Southeast —the region with the highest income, larger consumption level and greater industrial density— did not do well. São Paulo (-1.1%), for example, fell much more than the national average (-0.2%), pointing to the possibility of registering another quarter of losses in the adjusted series. Other negative results came from Rio de Janeiro (-0.3%) and Minas Gerais (-1.0%), but also from Paraná, Mato Grosso, Goiás, Ceará and Pernambuco.
As for retail trade, the situation could have been even more complicated, had it not been a considerable increase in sales of supermarkets, food, beverages and tobacco (+1.7%), the best performance in the seasonally adjusted series since January 2018 (+2.7%). Most of its segments, however, were not so lucky, especially those in the trade of durable or semi durable goods, such as office, computer and communication equipment (-2.7%); furniture and appliances (-4.8%); construction material (-2.7%). Consumers who are apprehensive about the future traditionally postpone the purchase of these types of goods.
In services, in addition to the transport segment, we see that professional, administrative and complementary services (-1.1% in Jul/18) demanded by companies have not done well for a while now. Another branch that remained in the red was information and communication (-2.2%), which represents a large share of the sector's total. Those that managed to grow despite everything were services provided to households (+3.1%), the only positive variation in the sector.