Letter IEDI n. 1084—The Industry in 2021 under the leadership of medium technology
At the start of 2021, and despite weak (seasonally adjusted) results month after month, the industry registered growth of 4.4% in Q1 in comparison to the situation a year ago, when the first impacts of the pandemic directly affected Brazil. This means an increase in relation to the end of 2020 (+3.4% in Oct–Dec/20) largely due to the very depressed bases of comparison.
This Letter IEDI assesses the performance of the manufacturing industry considering the four technological intensity ranges in which its branches are grouped, following the most recent version of the OECD classification, namely: high, medium-high, medium and medium-low technology intensity.
In Q1/21 (compared to the same period last year), manufacturing managed to do better than the total industry, which also includes the extractive branch. The increase reached +5.2%, implying a modest acceleration in the pace of growth versus Q4/20 (+4.8%).
All four groups of technological intensity were on the positive side, with an emphasis on the medium technology industry. Despite this, only half of them had more robust growth rates. The medium-low technology category registered a deceleration, as did the high-tech range which come very close to mere stability.
The 10.4% rise gave the medium technology industry the leadership in the Q1/21 expansion, after having already occupied this position in Q4/20 (+9.0%). Of its five components, three grew at double-digit rates: rubber and plastic, non-metallic minerals and miscellaneous products all gained speed.
Metallurgy, an important branch in this medium-intensity group, grew 8% in Q1/21, registering a deceleration compared to Q4/20 (+11.4%). In turn, only the branch of maintenance, repair and installation of machinery and equipment suffered an output loss (-9.1%)—it was the 11th quarter in the red.
The second best performance in early 2021 came from the medium-high technology intensity industry with 8.1%. It also registered an improvement compared to Q4/20 (+5.2%), but it is the group that suffered the most from the pandemic. Four of its five branches increased production, with emphasis on vehicles and auto parts (+4.4%), which had seen four consecutive quarters of negative figures.
The main growth levers of medium-high technology were the capital goods branches. The manufacturing of machinery and equipment increased 21.3% and that of electrical machinery, equipment and material 13.2%. Both had registered double-digit rates at the end of 2020, too. Chemicals, in turn, accelerated production.
The groups at the ends of the classification used here lost pace at the start of the year. The medium-low industry was already experiencing this trend: from 4.2% in Q3/20 it fell to 3.4% in Q4/20 and then to 2.2% in Q1/21. This is exclusively due to the food industry, which has the greatest weight in the group. Its production dropped 1.9% in Jan–Mar/21, while the others not only grew but gained strength.
In the medium-low range, the sectors of metal products and textiles, apparel, leather and footwear registered double-digit increases, in the latter case with a growth rate that doubled from Q4/20 (6.4%) to Q1/21 (13.7%). The acceleration of wood, paper and cellulose was also important, going from 0.4% to 8.7%, respectively.
Finally, the high-tech industry grew the least. Its deceleration led to a situation of virtual stagnation in Jan–Mar/21: only 0.3%, despite the resilience of the pharmaceutical sector (1.7%) which, due to the pandemic, does not face a crisis. It was the electronics that lost pace, going from 14.2% in Q4/20 to 3.1% in Q1/21.
Such deceleration was produced by the evolution of most branches of electronics, but the greatest contribution came from the sector of radio, TV and communication equipment, which registered a decrease of 6.2% in Jan–Mar/21. This result was offset by office supplies and information technology, which grew 30% in the same period.
Despite growth in all technology intensity categories of the manufacturing industry, the negative impact of COVID-19 has still not been fully overcome. This is what figures for the 12 months ended in Mar/21 indicate, that is, the numbers from Q2/20 to Q1/21.
All ranges remain in the red, with the worst case being the medium-high category, with an accumulated loss of 10%. Medium-low is the range with the least to recover, as it registered a drop of only 0.4% in 12 months. In an intermediate situation are the high and the medium technology industries, both with losses of 2.6% in the twelve-month period between Apr/20 and Mar/21.