Letter IEDI n. 1068—Industry by Technology Intensity: widespread setbacks in 2020
In 2020, manufacturing output declined 4.6%, due to the economic effects of COVID-19. As a result, since 2014 there have been four years of losses and three of positive variations, with 2017 being the best one (2.2%) for having a very depressed basis of comparison.
This Letter IEDI assesses the industry's performance in the past year by grouping its different branches into four technological intensity ranges, according to the methodology employed by the OECD. They are: high, medium-high, medium and medium-low technology intensity, remembering that the manufacturing industry does not have low technology branches.
The first finding is that none of these bands managed to grow in 2020. In other words, the negative impact of the pandemic was widespread, although some cases were worse than others.
The most intense losses were concentrated in the intermediate ranges, with emphasis on the medium-high category, which registered -12.6% in the year as a whole, mainly due to the production of vehicles and auto parts (-28.1%). This result of the medium-high range was very similar to that of 2015 (-15.8%), which means that in a period of just five years this group has suffered two extremely acute crises.
The medium technology intensity industry presented the second worst result: -5.8%, having already decreased 2.4% in 2019. The performance of the metallurgy industry (-7.3%), but also of non-metallic minerals (-2.3%) and rubber and plastic (-2.5%) counted for this.
Also in the red, but at an intensity lower than the total of the manufacturing industry, was the high-tech group, which registered -3.4% in 2020 as a whole. In this case, the 2% expansion of the pharmaceutical industry, due to the health nature of the crisis, contributed to cushion the group's decline. With people confined to their homes, the electronics business (TVs, sound devices, etc.) also did not do badly: 1.3%.
Finally, the medium-low technology intensity industry managed to remain flat, varying only -0.1% in the year. In this case, producing essential goods and resorting to exports were important mitigating factors in the crisis. Even so, among its branches there was a strong asymmetry, with food and beverages growing 3.6% and clothing and footwear shrinking 17.4%, for example.
Regarding Q4/20 alone, what can be inferred as a trend for 2021? Considering the end of last year, the signs are positive, since manufacturing grew 4.8% compared to the same period in 2019 and all categories returned to the black.
The Q4/20 reaction was stronger precisely in those bands that lost the most during the year: medium-high advanced 5.3% and medium intensity registered 8.9%. In the groups at the two ends of the spectrum, performance was more modest and very similar, with 3.1% in high technology and 3.3% in medium-low.
This expansion, however, may not have continued at the beginning of 2021, given the acceleration in the number of COVID-19 cases and the new variant of the virus, which has forced many localities to adopt new restrictive measures, the slow immunization of the population, and the end of emergency programs, which were essential to mitigate the economic impact of the pandemic up to the end of 2020.