Letter IEDI n. 1155—Easing of industrial losses in Q2 2022
After four consecutive months of growth, something that had not occurred since the second half of 2020, the industry returned to the red in Jun'22, completely canceling out the gains of May’22. After discounting the seasonal effects, it registered -0.4% compared to the previous month and -0.5% in relation to the same period last year. As recent dynamism has been weak, there is always the risk of sign reversals.
Thus, according to IBGE data, the industry finished the first half of the year in a worse situation than it was in the same period of 2021. In Jan–Jun'22, the sector registered a 2.2% output decline, with all of its macro-sectors in the red as well as 69% of the 26 branches surveyed. At least for now, 2022 is not a year of industrial recovery.
This is because, although the control of the COVID-19 pandemic has favored the performance of not only the industry but of all sectors of the economy too, the obstacles to a more robust expansion remain very present, with: unemployment still high; inflationary pressures leading to increases in the base interest rate (Selic), not yet fully passed on to loan rates; recovery of services demand from higher-income households; remaining bottlenecks in productive chains, aggravated by the war in Ukraine; external and internal uncertainties, arising from this year's political-electoral scenario, etc.
In the first half of 2022, the indicators of industrial entrepreneurs’ confidence were, on average, below the levels of the same period of the last year, both in the CNI survey (-3%) and in the FGV survey (-8%). In the latter case, the indicator indicated pessimism in most of the months in question.
Despite the unsatisfactory trajectory, Q2'22 brought an important mitigation of losses. Industrial production was closer to stability than to a fall: -0.2% versus the same period last year. In Q1'22, the drop had been of 4.4%. Given that the extractive industry shrank 4.7% in Apr–Jun'22, this relative improvement was due to the evolution of manufacturing, which was able to leave the negative ground in which it was since mid-2021 and registered +0.4%.
Based on the IBGE survey, the IEDI analyzed manufacturing "from inside," disaggregating this part of the industry into 93 segments. From the study, it became clear that the return to positive results in Q2'22 reached a small minority of segments (14% or only 6% in net terms, since some left the positive ground and fell again) and also there was no great increase in the number of segments with strong growth (from 11 to 14 segments with double-digit rises).
None of this, however, compromised the broad movement of relative improvement from Q1'22 to Q2'22 (73% of segments). The determinant for this was a significant reduction in cases with profound losses in Q2'22. The number of segments with double-digit drops went from 47% of the 93 segments in Q1'22 to 26% in Q2'22.
Although this is undoubtedly a favorable aspect, relative improvement did not mean growth in the vast majority of cases. In addition, it is also important to note that practically ¼ of the manufacturing industry remained in a very serious situation, with interannual losses more severe than -10%.