Letter IEDI n. 1120—Unpromising Signs
In Oct'21, the Brazilian economy saw the continuation of the adverse developments started in the previous month. Again, all major sectors contracted, giving unpromising signs for the last quarter of the year. Even services, more directly favored by the advance of vaccination, saw their losses worsen.
According to the IBGE, services real revenue shrank 1.2% in Oct'21 compared to the previous month, after seasonal adjustment. In Sep'21, the drop was of 0.7%. In turn, broad retail real sales—which include the segments of vehicles, auto parts and construction material—registered -0.9% and thus were in the red for the third consecutive month.
The industry, which practically did not grow in 2021, lost 0.6% of its production from Sep'21 to Oct'21. Even in the year-on-year comparison—which, until recently, was favored by the 2020 low reference bases—negative figures are now being registered: -0.6% in Aug'21, -4.1% in Sep'21 and -7.8% in Oct'21.
Losses were also widespread across all sectors in Oct'21 in relation to Sep'21. Although generally less intense than in previous months, they reached 70% of retail branches. Construction material (-0.9%), vehicles and auto parts (-0.5%) and furniture and household appliances (-0.5%) were among the main declines. In services, four of the five branches (80%) were in the red.
In the industry, in turn, 73% of the branches were negative. Regionally, however, most industrial parks managed to avoid losses, although some important parks were not spared. This was the case of São Paulo, one of the most modern and complete industries in the country, whose fall in relation to Sep'21 (-3.1%) was much more intense than the total for the sector nationwide.
Thus, our economy, already weaken even before COVID-19 hit (due to the severe crisis of 2015–2016), is now suffering from the scars of the pandemic: disruption of supply chains, rising inflation and interest rates, high unemployment, economic agents highly indebted, etc. The water crisis, political uncertainties and doubts about the management of the economic agenda complement the list of challenges and obstacles to economic growth in 2021.
As a result, most sectors have already returned to a situation worse than the pre-pandemic scenario, that is, the weeks right before the coronavirus outbreak hit the country. This is what the comparisons with Feb'20 show. In Dec'20, the industry was 3.4% above Feb'20; it lost this positive differential in the first half of 2021, reaching a level 0.8% below that mark and continued losing ground, so that in Oct'21 its output was 4.1% lower than the pre-pandemic figure.
For retail, in its broad concept, something similar happened, but with the difference that, at least in the first half of the year, it managed to preserve its achievements. In Dec'20, real retail sales were 0.8% above the pre-pandemic level and in Jun'21 they were 0.9% above that mark. The inflection came later and in Oct'21 they were 2.8% below Feb'20.
Services, in turn, seem to be at the beginning of this process since, due to the nature of many of their activities—more dependent on people's mobility and sociability—they were the last sector to overcome the COVID-19 shock. In Dec'20, services continued to be 3.2% below the pre-pandemic level, surpassing it by 2.7% in Jun'21 with the acceleration of vaccination in the country. In Oct'21, however, due to recent falls, they dropped to a level only 2.1% above Feb'20.