Letter IEDI n. 1100—Contrasting results
The first half of 2021 ended with different results across the large sectors of the economy. While services expanded, stimulated by the advance of vaccination and the reduction of restrictive measures, the industry stagnated and retail trade contracted. The negative effects of the pandemic are subsiding, but other problems are emerging.
In the case of retail, inflation acceleration has direct impacts by eroding the population's purchasing power, which is already heavily affected by high unemployment and insufficient hours worked, as shown by the Pnad/IBGE data for several months. After rising food prices in 2020, it is now the cost of fuel and energy that has been pushing inflation.
Indirectly, this also affects the industry, for which retail is an important channel for output distribution. But the industrial sector also faces challenges arising from persistent bottlenecks to obtaining domestic and imported inputs, due to the disarray of production chains caused by successive outbreaks of COVID-19 in Brazil and worldwide. The rise in interest rates, as a reaction to inflation, harms the manufacturing branches of durable goods. On the near horizon, there is still the risk that the water and energy crisis may deepen.
From May'21 to Jun'21, after discounting seasonal effects, real retail sales declined 2.3% in its broad concept—which includes the branches of vehicles, auto parts and construction material—and physical industrial production was flat. Services real revenue was in the black for the third consecutive time, growing 1.7%.
As a result of this positive phase of services, the Central Bank's IBC-Br indicator, which works as a GDP proxy, also grew in Jun'21: +1.14% compared to May'21, with seasonal adjustment, leading it to be 0.8% higher than that in Feb'20, that is, the pre-pandemic level.
Among the large sectors, retail has remained above this mark despite a recent accommodation and services have only very recently achieved this feat. For both, the evolution in the first six months of 2021 was positive. In Dec'20, broad retail was 0.8% higher than in Feb'20 and in Jun'21 it advanced to 1.5% above. In the case of services, they were 3.2% below the pre-pandemic figure in Dec'20 and in Jun'21 they surpassed this mark by 2.4%.
It is in the industry that the picture got complicated. From Jan'21 to Jun'21, in the series with adjustment, there were three months of output losses, two months of stability and only one month of growth, May'21. As a result, the sector, which was 3.3% above Feb'20, returned to exactly to the same pre-pandemic level.
The weakening of the industrial recovery has been affecting the South and Southeast regions of the country. In Jun'21, only Rio de Janeiro's industry grew in the Southeast. São Paulo recorded -0.9% compared to May'21. In the South, all states were in the red.
In total, of the 15 regional industries monitored by the IBGE, 10 were in the red from May'21 to Jun'21, which corresponds to 67% of the total. As a result, in most regional parks (10 of them), the Jun'21 production level was below pre-pandemic output; in Dec'20, 8 parks were in this situation. This indicates that the overcoming of the COVID-19 crisis was more concentrated regionally.
In retail trade, the unfavorable evolution resulted from losses in most of its branches, reaching 6 of the 10 monitored by the IBGE. Although they are not among the worst cases, two branches had a great contribution to the Jun'21 fall as they account for almost 40% of the broad sector: fuels and lubricants (-1.2%) and supermarkets, food and beverages (-0.5%).
The prices of products in these two sectors have shown to be important vectors in the recent acceleration of inflation, which negatively affects not only their sales, but also those of other goods since, due to their essential nature, there is a limit to the reduction of their consumption. Another vector that is gaining strength with the water crisis is the price of electricity.
In services, the increase in Jun'21 was as strong as in May'21, but was accompanied by a more consistent distribution, as 100% of its segments had positive figures, against 80% in the previous month. Services provided to households was the segment that grew the most, recording its third consecutive increase—a trajectory certainly favored by vaccination and very welcome too, as its turnover is still 22.8% below the pre-pandemic level.
Information and communication services, in turn, had the second highest rate of expansion, resuming the pattern of dynamism of Mar–Apr'21, which kept this segment at the forefront of the process of revival of services. Its turnover exceeded the level of Feb'20 by 9.8%.