Letter IEDI n. 1069—Industry and economic recovery in early 2021
From 2020 to 2021, there was an increase in the challenges to be overcome for the economic recovery to continue to gain strength and greater consistency. The advance of COVID-19 infections, the end of emergency programs and unemployment at record levels undermine the country's growth conditions.
Few activities have been spared signs of deceleration and others are still far from overcoming the losses suffered at beginning of the pandemic. Despite this, the industry has been showing resilience and sustaining the economic expansion in early 2021. It registered a 0.4% increase in Jan/21, with seasonal adjustment, and reached a production level 3.7% above that of Feb/20.
Retail trade, which was doing better, entered a new phase of losses and the service sector started to grow again, but its reaction remains hindered by COVID-19. With the tightening of restrictive measures, especially from March, the prospects for these two sectors are not favorable in the coming months.
Real retail sales remained in the red for the third consecutive time, registering -0.2% in Jan/21, after adjusting for seasonal effects. In its broad concept, which includes sales of vehicles, auto parts and construction material, the drop reached 2.1%. In this way, the sector lost everything it had been gaining; in Jan/21 it was again below the level of Feb/20: -2.1% in the case of broad retail and -0.4% in narrow retail.
The services sector, flat in Dec/20 (0%), managed to grow 0.6% in Jan/21, also after adjustment. It was this improvement in services and the maintenance of industrial growth that led the Central Bank's IBC-Br indicator, which acts as a proxy for GDP, to register +1% from Dec/20 to Jan/21. Even so, real services’ revenue was 3% below Feb/20, that is, the pre-COVID-19 level.
At the beginning of the year, the advance in industrial production was accompanied by favorable results in 42% of its branches and 47% of its regional parks. Among the macro-sectors, two recorded setbacks and two expanded. The best performance came from capital goods (+4.5% against Dec/20), followed by semi- and non-durable consumer goods (+2%).
In regional terms, there was growth in seven of the fifteen locations monitored by the IBGE, in the seasonally adjusted series. Although the scoreboard was divided, those that managed to advance registered more robust growth rates than the total for Brazil. Moreover, there are important regional industries among them, such as São Paulo (+1.1%), Rio Grande do Sul (+1.9%) and Rio de Janeiro (+2.9%), besides others.
In retail, a decline was not only registered again in Jan/21 but was also widespread among its different branches. It reached 60% of them, with emphasis on furniture and household appliances (-5.9%, with adjustment) and supermarkets and food (-1.6%), due to a long sequence of negative rates, and books, newspapers and stationery (-26.5%) and also clothing and footwear (-8.2%), due to the intensity of their losses. These last two branches never managed to compensate for the drops of Mar–Apr/20 and in the last few months started to get further away from pre-crisis sales levels.
In services, the positive performance of Jan/21 was driven by only two of the five branches identified by IBGE: professional, administrative and complementary services (+3.4% compared to Dec/20) and transportation services, their auxiliaries and mail (+3.1%). In both cases, there are still depressed comparison bases, as they remain below the pre-crisis turnover levels (-4.7% and -2.7%, respectively).
Still hindering the reaction of the service sector, we see services provided to households—which in Jan/21 (-1.5%) contracted for the second consecutive time, remaining 29.9% below the level of Feb/20—and the segment of other services—which includes a diversified set of activities such as financial, real estate, rural services, etc.—whose turnover fell 9.2% in Jan/21, causing this branch to be 3.2% below Feb/20.