Letter IEDI n. 1133—Industry at the turn of 2021–2022
Since the beginning of last year, the Brazilian industry has not been able to present even two consecutive months of output expansion. Each step forward is followed by new losses, increasingly distancing the sector from the level achieved before the COVID-19 shock. The year 2022 began in this very manner.
In Jan'22, after seasonal adjustment, total industry had a 2.4% decrease in output, canceling out most of the growth of Dec'21 (+2.9%), which had surprised for its intensity. As a result, the sector was again 3.5% below the pre-pandemic mark, that is, the level of production of Feb'20.
Compared to Jan'21, the decline remained: -7.2%, which consists of the sixth consecutive month in the red and a worsening in relation to the intensity of the fall seen in the last quarter of 2021 (-5.8%). That is, there is no evidence of a reaction.
As a result, the confidence of the sector's entrepreneurs is being undermined. The FGV indicator remained in the region of pessimism in both Jan'22 and Feb'22, reaching the lowest level since Jul'20. The same is true for the CNI index regarding entrepreneurs' assessment of current market conditions, which fell below 50 points in Feb'22.
Negative signs also marked most industrial branches in Jan'22. According to the IBGE, of the 26 branches surveyed, 20 registered a decrease against Dec'21, with seasonal adjustment, equivalent to a fraction of 77% of the total. As for the macro-sectors, none avoided negative figures.
The largest loss was in durable consumer goods (-11.5% compared to Dec'21, with adjustment), canceling out the positive rates of Nov'21 and Dec'21 and recording the lowest level since Jun'20. Much of this was due to the automotive industry, particularly affected by bottlenecks in supply chains.
Between Dec'21 and Jan'22, production of vehicles fell 17.5%, after adjusting for seasonal effects. Other branches of durable goods, which saw inventories increase at the end of last year, also hit the brakes hard: -4.5% in computer and electronics and -5.0% in furniture, for example. These are all products whose markets are more sensitive to the recent rise in interest rates, as part of the Central Bank’s fight against inflation.
Capital goods, also greatly impaired by higher interest rates as well as by the greater degree of uncertainty—which in early 2022, among other factors, stemmed from the outbreak of the omicron variant—recorded a 5.6% output decline in Jan'22, with adjustment. In this case, as in durable consumer goods, the fall was more than enough to offset the increase of Dec'21.
The intermediate goods macro-sector, in turn, after growing +1.4% in the final month of last year, fell 1.9% in Jan'22, resuming a long sequence of negative variations that had been interrupted in Nov–Dec'21.
Semi-durable and non-durable consumer goods were the ones that least lost production: -0.5% in Jan'22, protecting some of the expansion obtained in Dec'21 (+1.5%). Pharmaceutical and pharmacochemical goods (-5.4%) and beverages (-4.5%) were two of its branches with substantially negative results this year.