Letter IEDI n. 894–The Industry in October 2018: on the way to a weak year
The year of 2018 has been marked by a slowdown in the industrial sector, a move that deepened in the third quarter and, due to October's result, should not be reversed until the end of the year. Compared with September, production remained virtually stagnant, changing by only +0.2% (seasonally adjusted). In relation to the same period of last year, there was a rise of +1.1%, one of the lowest results of the year, even though in 2018 October had one more working day than in 2017.
Thus, the industry is still in low gear and was not able to deliver a better profile in terms of the distribution of its dynamism. On the one hand, works as a mitigating factor the fact that most industrial segments stayed in the blue in November: 17 of the 26 followed by the IBGE (in the series with adjustment). On the other hand, this favorable aspect is offset by the regional profile, since 9 of the 15 locations surveyed were in negative territory. São Paulo, in turn, did not lose, but it also did not win anything (0% versus Oct/18, with adjustment).
For now, the good news comes from the signs for November, when the confidence indicators improved, becoming notable in some cases. It is true that, for some time now, the main responsible for the rise in optimism has been the expectations regarding the future, but businesses' current conditions have also given entrepreneurs greater confidence this month. So the picture may be a bit better in November, but it should not repeat what was seen in early 2018.
Going back to October, seasonally adjusted growth was registered by exporting segments and by those with large losses to be compensated, such as paper and pulp, metal products, machinery and equipment, and vehicles. The same goes for the regional distribution, with more substantial expansion in Amazonas, Minas Gerais and Santa Catarina.
The performance of July-October gives a better indication of the current difficulties faced by the industrial recovery. Growth in this period (+1.2% versus the same period of the previous year) was almost half the result of the first six months of 2018 (+2.2%) and 1/4 of the rate of the second half of 2017 (+4.1%). If this dynamic continues, we will clearly be switching from a phase of recovery to one of industrial prostration.
This poor performance, however, is not as acute in some macro-setores, as capital goods and durable consumer goods, and some areas, like the Northeast region as a whole, Rio Grande do Sul, Santa Catarina and Espírito Santo.
Nonetheless, the general rule stands, marking the performance of important macro-sectors and industrial regions, as can be seen from the decline in semi-durable and non-durable consumer goods (-0.2% in Jul-Oct/18), the virtual stagnation of intermediate goods (+ 0.5%), as well as from the regression in São Paulo (-1.5%) and also in Minas Gerais (-0.4%) and Amazonas (-3.7%).
Capital goods are the macro-sector that has been best able to maintain its growth rate since last year, registering +7.7% in Jul-Oct/18, influenced by small investment projects, exports and agricultural investments. Durable consumer goods remain at a reasonable level of dynamism: +7% in Jul-Oct/18, heavily based on the bounce-back of credit to households, but also on their exporting performance. Despite this, there was a significant loss of dynamism in relation to the 1st half of 2018 (+14.1%).
The macro-setor of semi- and non-durable consumer goods is in sharp decline, as it is more dependent on the employment and income conditions of the population, which have still much to improve. The drop of -0.2% in Jul-Oct/18 was mainly due to clothing, footwear, beverages and food, whose exports have also shrunk. Intermediate goods, on the other hand, registered only +0.5% and Jul-Oct/18, a rate that is no more than 1/6 of what was seen in the second half of 2017.