Letter IEDI n. 1067—Lower industrial growth at the beginning of 2021
At the beginning of this second year of the pandemic, the Brazilian industry remained on a growth path, but at a slower rate than at the end of 2020. Its output expanded 0.4% in Jan/21 compared to the previous month, after the elimination of seasonal effects, according to the IBGE. The acceleration of COVID-19 cases, the end of emergency aid programs and unemployment at record levels are factors that contributed to the decline.
This performance at the margin, which better captures the most recent trends, corresponded to half the growth of Dec/20 (0.8%) and almost a third of that of Nov/20 (1.1%), in addition to being accompanied by a decline in 58% of industrial sectors. Considering the manufacturing industry performance, the variation was -0.1% in Jan/21, the first negative rate since Apr/20.
One factor that mitigated the slowdown came from inventories. The CNI indicator went from 45.5 points to 48.3 points between Dec/20 and Jan/21. In other words, although it shows no expansion yet (for being below 50 points), there was a certain easing in the situation of inventories.
In this context, industrial entrepreneurs' assessment of the current conditions of their markets has become less optimistic since the beginning of 2021. The FGV indicator went from 119.9 points in Dec/20 to 116.3 points in Jan/21 and then to 114.5 points in Feb/21. The CNI's moved from 59.5 points in Dec/20 to 53.2 points in Feb/21 and fell back into the region of pessimism now in Mar/21: 48.9 points. Based on these perceptions, the industry's performance in the remainder of the first quarter of the year will likely be weak, too.
As for Jan/21, the IBGE shows that production registered a decrease in half of the industrial macro-sectors. Intermediate goods recorded the biggest drop: -1.3% compared to the previous month, seasonally adjusted. As a result, the sector lost the gains of Dec/20 and indicated that it was basically flat since the beginning of the final quarter of last year, as it registered -0.2% in both Oct/20 and Nov/20.
Compared to Jan/20, production of intermediate goods slowed down, as did the industry as a whole, with growth falling from 8.2% in Dec/20 to 2.3%. Much of this was due to food, oil products, vehicles and metallurgy intermediaries. Total industry, in turn, had a similar evolution, from 8.2% to 2.0% in the same period.
Durable consumer goods recorded their first decline since Apr/20: output fell 0.7% in Jan/21 in the seasonally adjusted series. In relation to Jan/20 it registered -4.2%, the worst result among the macro-sectors in this comparison, due to vehicles, other transport equipment and brown line household appliances.
In the part of the industry that resisted the deceleration better and preserved the positive sign, the best performance came from capital goods, with 4.5% compared to Dec/20, with seasonal adjustment. In relation to Jan/20, it was also the one that grew the most: 17%, even with the negative working-days effect that marked Jan/21 (two fewer than in Jan/20).
Semi-durable and non-durable consumer goods were also in the black, with production rising 2% compared to Dec/20, after adjustment. Despite this, it is worth noting that this macro-sector has been alternating highs and falls since the final quarter of last year. This period coincides with the reduction of the emergency aid paid to families and its subsequent extinction in 2021. Compared to Jan/20, there was a 0.4% decrease, due to the meat and beverage sectors.
In view of the obstacles at the beginning of the year, the projections of the Central Bank's Focus Bulletin for industrial production in 2021 as a whole have been declining. The median of expectations, which was 5.03% at the end of Jan/21, fell to 4.37% at the beginning of Mar/21.