Letter IEDI n. 1095—Widespread growth in May 2021
With the renewal of the emergency aid program and the advance of vaccination in Brazil and other parts of the world, which is stimulating global trade, the level of economic activity in the country increased again in May'21, in a very widespread way across the big sectors. Retail trade and services grew for the second consecutive month and the industry registered its first increase of the year.
The best performance came from retail sales in its broad concept, which includes construction material, vehicles and auto parts: +3.8% compared to Apr'21, after the elimination of seasonal effects. Then came the industry with +1.4% after a three-month decline and virtual stability in Jan'21. Services, in turn, recorded +1.2% in the series with adjustment, maintaining the dynamic pace seen in the previous month.
With that, all sectors recovered the losses from COVID-19. In May'21, broad retail was 1.6% above the pre-pandemic sales level of Feb'20, while services were only 0.2% above. The industry, for which 2021 has not yet brought expansion (-3.1% in May'21 compared to Dec'20), was exactly at the same level as in Feb'20.
Despite this favorable evolution, the Central Bank's IBC-Br indicator, which works as a proxy for GDP, registered a negative change from Apr'21 to May’21, after adjusting for seasonal effects: -0.43%. Even so, expectations for economic growth in 2021, according to the BCB Focus Bulletin, continued to progress favorably, going from +5% in mid-Jun'21 to +5.99% in mid-Jul'21.
Regarding the diffusion of positive signs, retail once again stands out with 90% of its branches in the black compared to the previous month. It is worth mentioning the favorable role of the progressive relaxation of the restrictive measures that many cities had adopted to deal with the worsening of the pandemic in earlier months.
The only exception was sales of pharmaceutical and perfumery products, which recently registered some accommodation. The best results came from sectors more directly affected by the restrictions on people's mobility and that, therefore, had more depressed bases for comparison: textiles, apparel and footwear (+16.8% compared to Apr'21, with adjustment), whose consumers' habits tend to imply in-person sales, and fuels and lubricants (+6.9%).
After retail, it was the service sector that showed the best distribution of positive signs: 60% of its branches saw real revenue rise, with an emphasis on services provided to households (+17.9%, with adjustment), which benefited most from the relaxation of social isolation measures and the progression of vaccination. Transport services (+3.7%), a segment closely related to the general level of economic activity, had the second highest increase.
In the industry, however, the score was more balanced: only half of its macro-sectors managed to grow and 58% of its branches were in positive ground. This was especially true for those that remain far away from the pre-pandemic level, such as clothing and footwear, mining and quarrying, metallurgy, and petroleum derivatives, positively affected by the recovery of the world economy, in addition to food, beverages and pharmaceutical products.
In the different regional industrial parks, growth was more evenly disseminated, reaching 73% of the 15 locations monitored by the IBGE. Most of these areas with positive figures were helped by low bases of comparison: 7 of them had losses in Apr'21 and, in some cases, also in the previous months. Among the largest industrial centers were, for example, São Paulo and, to a lesser extent, Rio Grande do Sul.
The Southeastern states pulled industrial dynamism in May'21, being among the highest increases in the seasonally adjusted series. The sign of industrial revival in the region is the big news of these latest data, especially in the case of São Paulo (+3.9%), which had not registered a more robust increase since Sep'20.