Letter IEDI n. 1086—Waiting for better days
The industry, for now, is finding it difficult to grow in 2021. Although the improvement in the international economy contributes to its dynamization, especially in the extractive sector, the domestic market is still depressed, as shown by the GDP data for household consumption in Q1'21. It has been three consecutive months of falling industrial output.
From Mar'21 to Apr'21, after seasonal adjustment, the sector registered -1.3%, with widespread losses across its branches: 70% of the 26 monitored by the IBGE were in the red, as were half of the macro-sectors. Regionally, 60% of the 15 industrial parks also saw output fall in this comparison.
Production of semi- and non-durable consumer goods had its third consecutive negative rate in Apr'21: -0.9%. It was the worst performance registered. Much of this was due to food (-3.4% compared to Mar'21, with adjustment), apparel (-5.2%) and leather and footwear (-8.9%). This is the part of the industry most directly affected by high unemployment, drops in real income and cuts in the emergency aid paid to families.
Intermediate goods were also negative. In fact, this macro-sector has barely moved in recent months, oscillating very close to stability. As it is the core of the industrial system, this performance demonstrates the lack of dynamism of the sector as a whole.
The sluggishness of intermediate goods suggests that overcoming the observed input bottlenecks is unlikely to happen quickly. Other evidence in this direction comes from the CNI monitoring of inventories, which pointed to a decrease in Apr'21. A little more than 2/3 of the sectors followed recorded lower stocks than planned.
Among the macro-sectors that grew from Mar'21 to Apr'21 are durable consumer goods, which interrupted the succession of negative rates of previous months, largely thanks to the reaction of vehicle production (+1.4% with adjustment). Even so, it is still the macro-sector furthest from the pre-pandemic level, being 10.6% below Feb'20.
As for capital goods, after the inflection in Feb–Mar'21, the 2.9% increase in April may indicate that this macro-sector is regaining the lead of the industrial reaction, as seen in the second half of last year. It is necessary, however, that this movement continues. Based on IBGE interannual information, the dynamism of capital goods is being pulled by those products demanded by agriculture, construction and transportation.
For the next few months, there are chances of a better performance of manufacturing, given the return of the emergency aid paid to families, although its value and number of beneficiaries are lower, the continued relaxation of restrictive measures and the progress of vaccination. The world economic recovery, driven by rapid immunization in the USA and Europe and by Chinese growth, is another favorable aspect. These are factors that will bring better days for the industry.
In May'21, the CNI and FGV confidence indices signaled an improvement in relation to April, even though the assessment of the current situation did not follow this trend, at least not to the same degree. At the beginning of Jun'21, the BCB's Focus Bulletin pointed to an estimated 6.1% increase in industrial production in 2021, which corresponds to a revision of +0.6 percentage point compared to the scenario at the end of May'21.