Letter IEDI n. 1090—The progress of global industry in 2021
According to UNIDO (United Nations Industrial Development Organization), the recovery of the world industry continued in early 2021, even though new COVID-19 outbreaks undermined dynamism in some countries, notably in the group of emerging economies.
Output of the world manufacturing industry grew +1.3% in Q1'21 compared to the previous quarter, after seasonal adjustment. It was the third consecutive positive rate, but this figure shows some accommodation, as the rise in Q4'20 (+3.7%) was almost three times higher.
Even so, the dynamism in early 2021 remained higher than in 2019, when trade conflicts between the US and China contributed to an almost stagnation of the world industry, which grew only +0.3% on average in each of its quarters.
Compared to the same period of the previous year, the growth rate was +12%, due to depressed bases of comparison, as COVID-19 harmed Chinese industrial performance at the beginning of 2020.
This result was especially driven by China (+38.2% versus Q1'20), as the industrialized economies, despite being on positive ground, were still experiencing the negative effects of the restrictive measures that were re-imposed from Oct'20 with the deterioration of the health situation.
The performance of manufacturing in industrialized nations was +1.5% in Jan–Mar'21, the first positive rate since Q1'19 on the year-on-year comparison. In relation to the end of last year, the increase was of +1.6%, discounting seasonal effects, that is, half the growth rate of Q4'20 (+3.5%).
Expansion from Oct–Dec'20 to Jan–Mar'21 was mainly driven by developed countries in Asia, which managed to maintain momentum (+3.6%). The USA (+0.6%) and Europe (+1.1%) also grew, but slowed down.
Emerging and developing economies except China, helped by low bases of comparison, posted growth of +3.2% in Q1'21 versus the same period in 2020, but only +0.7% in relation to the immediately previous quarter. This was the group of countries that lost the most momentum at the margin: its growth rate dropped to 1/8 of that of Q4'20 (+5.6%).
Among emerging countries, Latin America was one the regions that grew the most compared to Jan–Mar'20, recording +5.4%, but only +0.9% in relation to the immediately previous quarter. The year-on-year figure was mainly due to the industries of Argentina (+11.7%) and Brazil (+6.6%).
China has been a case apart, as it was the first hit by COVID-19, as mentioned above, but also because it has shown a more consistent recovery, with manufacturing starting to grow again already in Q2'20. Even so, it registered some accommodation at the margin, posting +1.1% in Q1'21 compared to Q4'20, with seasonal adjustment.
Based on data from the national statistical institutes of the countries themselves, the OECD and Eurostat, the IEDI prepared an international ranking of industrial output growth for several countries in Q1'21. Among the 45 countries in the sample, Brazil occupied the 13th place, with an increase of +5.2% compared to the same period of the previous year, ahead of countries such as France, Japan, Germany and the USA.
UNIDO data also show that the medium-high and high-tech industries (+16.8% compared to Q1'20) led world manufacturing growth in early 2021, as happened in the two previous quarters. Among the highlighted sectors are computers, electronics and optical products, as well as pharmaceuticals, whose year-on-year variations were +26.2% and +9.0%, respectively, in Q1'21.
Finally, UNIDO released its scenario for world industrial performance in 2021. In this case, the forecasts refer to industrial value added and not physical production. The projected increase is of +7.6%, after an estimated contraction of -6.8% in 2020.
For UNIDO, the reactivation of the US-China axis will be largely responsible for leveraging the 2021 result. Chinese manufacturing value added is expected to rise by +9%, far outpacing the decline caused by the pandemic, which in 2020 was a mere -0.7%. Industrialized countries will grow in line with the world total: +7.2%, but without recovering the entire fall of 2020 (-10.4%). There will, however, be a notable contribution from the USA (+10.4%).
The industry of emerging and developing countries except China will grow a little less than the industrialized group, according to UNIDO, but will show a smaller gap in relation to their losses of 2020. An increase of +5.9% in 2021 is estimated against a drop of -6.2% in 2020. The exception is Latin America, whose industry will be the one farthest from compensating for COVID-19 losses. It is likely to grow only +4.2% in 2021, that is, just over 1/3 of the magnitude of the 2020 drop (-11 .7%).