Letter IEDI n. 1245—Industry and trade at the front
November 2023 was a month of expansion in the major sectors of the economy, driven by retail trade, largely due to sales of vehicles and auto parts, and by the industry, driven by the extractive sector. The service sector also grew with the help of favorable bases of comparison, after three consecutive months of contraction.
From Oct'23 to Nov'23, after discounting seasonal effects, real sales of retail trade, taken in its broad concept (which includes the branches of vehicles and auto parts, construction material and wholesale-retail), advanced 1.3%. In its narrow concept, however, it did not move: +0.1%.
In the industry, the result was +0.5% in the seasonally adjusted series, interrupting the sequence of negative or very-close-to-zero rates that prevailed since the beginning of the second half of the year. This expansion, besides not vigorous, was only possible thanks to the +3.4% increase in extractive activities. Manufacturing output fell 0.2% in Nov'23.
Services' real revenue, on the other hand, registered 0.4% in Nov'23, seasonally adjusted, compensating little for the 2.2% drop accumulated in Aug–Oct'23. As a result, its process of accommodation continued, given that the sector has long surpassed its pre-pandemic level (since Jun'21). It is worth noting that, unlike the industry, services did not fall below this mark again, even in the face of the recent period of inflationary acceleration.
Thus, in Nov'23 the Central Bank's IBC-Br indicator, which acts as a proxy for GDP, interrupted a sequence of three consecutive months of contractions (+0.01% versus Oct'23, with adjustment). Year-to-date, that is, in Jan–Nov'23 in relation to the same period of the previous year, the indicator points to growth of 2.4%.
In this comparison, the service sector leads the expansion of economic activity, registering a 2.7% increase in real revenue. In 2023, the reduction of the gap in services provided to households vis-à-vis the pre-pandemic level and the growth of professional and administrative services, with the expansion in face-to-face activities, also became important drivers.
Over the past year, the loss of dynamism of services as a whole, which went from a rise of 5.4% in Q1'23 to a decline of 0.3% in Oct–Nov'23, was not more intense only because two branches remained in the black (and with some strength): services provided to households, with +2.9% in Oct–Nov'23 and +4.4% in the year to Nov'23, and professional, administrative and complementary services, with +4.2% and +4.1%, respectively.
Second came retail trade, whose real sales grew 2.6% in the broad concept. Two of its branches were mainly responsible for this performance: supermarkets, food, beverages and tobacco (+3.5% versus Jan–Nov'22) —helped by the slowdown in inflation, improvement in employment, and government income transfer programs— and vehicles and auto parts (+8.2%), which received a boost from the reduction in federal taxes.
Sales of these retail branches remained heated in Oct–Nov'23, which gives an indication of the performance in the last quarter of the year. In the first case, there was an increase of +3.4% and in the case of vehicles and auto parts, sales gained additional robustness: +13.7% compared to Oct–Nov'22. As a result, total broad retail accelerated from +2.9% in Q3'23 to +3.5% in Oct–Nov'23.
The industry, whose markets are more affected by the still high levels of interest rates in the country, is the odd one out. Its physical output was stagnant in Jan–Nov'23: +0.1% against Jan–Nov'22. The same was true for the macro-sector of intermediate goods (+0.1%), which consists of the core of the industrial system, producing inputs for the rest of the sector.
In the last two months covered by IBGE information, that is, Oct–Nov'23, more favorable bases of comparison helped the sector to obtain a better performance: +1.2% compared to Oct–Nov'22, with semi-durable and non-durable consumer goods in the lead (+4.1%). The stumbling blocks continue to be capital goods —with a rate of -10.7% in Jan–Nov'23 and -12.2% in Oct–Nov'23— and, more recently, durable consumer goods, whose production decreased 5.8% in the two-month period under analysis.
Regionally, 55% of industrial parks showed output increases in the year to Nov'23, in general those specialized either in the extractive branch or in the processing of agricultural commodities. Among the best results are: Espírito Santo (+9.4% versus Jan–Nov'22), Mato Grosso (+5.4%), Goiás (+4.9%), Pará (+4.5%) and Rio de Janeiro (+4.4%).
More diversified industrial parks, that is, those with the presence of a greater number of manufacturing branches, are among the negative results. This is, notably, the case of São Paulo (-1.4% against Jan–Nov'22), but also of Rio Grande do Sul (-4.4%) and the Northeast as a whole (-4.0%).
In these states, the most recent data show, at least, an attenuation of their adversities, even influencing the national aggregate (+1.2% compared to Oct–Nov'22). São Paulo's industry managed to be practically stable in Oct–Nov'23 (-0.2%) and the state's industry reduced its losses (-1.8% vis-à-vis -3.1% in Q3'23). The Northeast came out of the red, registering +0.6% in Oct–Nov'23.