Letter IEDI n. 1074—Growth with new drivers
February 2021 was a month of positive dynamism for the Brazilian economy, with services and retail regaining strength after an unfavorable moment at the turn of the year. The industry, this time, was in the red, harmed (with some lag) by the drop in retail sales in the previous months, given that this sector is an important means of distributing industrial goods.
The best result in the transition from Jan/21 to Feb/21 was registered by retail trade: 4.1% (seasonally adjusted) in its broad concept, which includes the branches of vehicles, auto parts and construction material. This, however, only partially offset the losses of Dec/20 and Jan/21 (-3.1% and -2.2%, respectively). In its narrow concept, the reaction was much weaker, at just +0.6% in February.
Then came services, with an increase of 3.7%, ensuring for the first time a level of real revenue higher than in the pre-COVID-19 period. The rise, which reached all of its segments, came after two consecutive months of virtual stagnation (+0.3% in Dec/20 and +0.1% in Jan/21).
These figures, which led the Central Bank's IBC-Br indicator to register a rate of 1.7%, signaling GDP expansion in Feb/21 in relation to Jan/21, will most likely be short-lived, given the worsening of the country's health situation and the need to tighten restrictive measures as of Mar/21. With prohibitions on the operation of commercial and service activities, it is difficult for the positive performance of these sectors to continue in the coming months.
This is also not good news for the industry, which had been showing resilience until recently, remaining in positive ground despite the reduction and then extinction of emergency programs, the uncertainties of the pandemic and high unemployment. In Feb/21, its production decreased 0.7% compared to Jan/21, with seasonal adjustment. Against Feb/20, it was practically flat, registering only +0.4%.
In the industry, the weakening was widespread. It reached three of the four macro-sectors, 14 of the 26 branches (that is, 54%) and 10 of the 15 regional parks monitored by the IBGE (that is, 67% of the total). São Paulo (-1.3% compared to Jan/21) and the states of the South region, which had been doing better than the average of the Brazilian industry, were also in the red.
In some regional industries, the decline in Feb/21 was not a one-off, as they were already feeling the weight of the reduction in the emergency aid paid to families. This is notably the case of the Northeast region as a whole (-0.2% in Dec/20, -2.4% in Jan/21 and -2.6% in Feb/21, with adjustment), whose industrial production has not grown since Dec/20. This deterioration is serious, since the Northeastern industry is still far from overcoming the COVID-19 shock of Mar–Apr/20.
In retail, the general positive result was also seen in most segments. Of the 10 activities identified by the IBGE, 6 managed to grow from Jan/21 to Feb/21. The exceptions—which include fuels, computers, medicines and perfumery and other articles of personal use—have fallen little, in a picture resembling more a situation of stability than of decline.
The biggest sale increases came from segments such as furniture and appliances (9.3%), vehicles and auto parts (8.8%) and fabrics, clothing and footwear (7.8%), which had depressed bases of comparison given the intense setbacks in the previous months. Most of them recovered only part of the losses.
The growth in real service revenue in Feb/21, on the other hand, was due to the increase in all of its branches, without exception. The best performance came from services provided to households, which rose 8.8% compared to Jan/21, with seasonal adjustment, also from a very low basis of comparison. This branch is the one likely to suffer the most with the more restrictive sanitary measures.
The growth of professional, administrative and complementary services, and transport and postal services have been more consistent, with positive rates in Jan/21 and a strengthened dynamism in Feb/21 in the seasonality-free series.
Information and communication services, helped by the need for physical distancing and remote work, are also in a comfortable situation because, despite the low dynamism of the last few months, they are at a higher point than last year (2.1% versus Jan–Feb/20).