Brazilian industrial output has not yet been able to increase in 2024. The latest IBGE data show that, although much less intense than in the previous month, there was a new drop in Feb'24 versus Jan'24, seasonally adjusted.

The figure for the month was -0.3%, but largely due to the extractive branch which, after a mostly positive year in 2023, has been losing part of what was gained, in a trajectory of accommodation. Manufacturing, in turn, did not expand, but neither did it shrink, as happened at the beginning of last year.

Aggregate manufacturing output as flat in both Jan'24 and Feb'24 (with seasonal adjustment), while the extractive branch fell 6.9% and 0.9%, respectively, driving the performance of the macro-sector of intermediate goods as it includes extractive activities.

Among the industrial macro-sectors, only intermediate goods contracted in both Jan'24 and Feb'24. Semi- and non-durable consumer goods expanded again (+0.4%), cancelling out the previous drop (-0.4%). Capital goods (+1.8%) and durable consumer goods (+3.6%) seem to have left behind the sequence of adverse months seen in the 2nd half of 2023.

Another important observation regarding the short-term performance, indicated by the seasonally adjusted results, is that, although 12 of the 25 industrial branches identified by the IBGE were unable to increase in Feb'24 (compared to 7 branches in Jan'24), most of them (58%) were virtually flat, with variations between 0% and -0.3%.

In contrast to the situation a year ago, however, the negative signs are dispersed, with the caveat that there was a favorable working-days effect, since Feb'24 had one more working day than Feb'23.

The general industry registered +5.0% in Feb'24, the strongest year-on-year increase since Jun'21 (+12.1%), when bases of comparison depressed by the 2020 COVID-19 shock helped to obtain significant positive variations. 

In addition, output of all macro-sectors also increased in Feb'24 versus Feb'23, with emphasis on durable consumer goods (+9.3%), driven by computer, electronic and optical equipment (+18.1%), but also by the automotive industry (+9.8%). The other macro-sectors grew at very similar paces, close to +5%.

Thus, early 2024 was quite different from the beginning of 2023. In the first two months of this year, industrial production rose 4.3%, but fell 1.1% in the same period last year, and now all its macro-sectors are in the black.

Capital goods had the greatest change: -9.4% in the 1st two months of 2023 and +3.6% in the 1st two months of 2024. In this case, the basis of comparison is low, since its production fell systematically throughout 2023. Another reversal of sign was registered in the macro-sector of intermediate goods, from -2.4% to +4.8%, respectively.

As for consumer goods, they were already in the black in Jan–Feb'23 and remained so in Jan–Feb'24. For semi-durables and non-durables, there was even a boost in performance: from +2.7% to +4.1%, respectively, thanks to the slowdown in inflation and advances in employment and household income. 

Durable consumer goods, in turn, grew 7.6% in the 1st two months of 2023 and 5.2% in the same period of 2024, remaining in the lead among the macro-sectors, mainly due to production of household appliances. To boost this part of the industry, further progress in the area of credit to households would be beneficial, as some income brackets are still heavily indebted and are subject to high interest rates on their loans.

Despite a promising general context— even more so if the Central Bank continues to reduce the base interest rate for a longer time, helping the markets for investment and durable consumer goods —the path of industrial dynamism still remains uncertain and fragile.

As an illustration, in Mar'24 all indicators of entrepreneurs confidence in the sector showed a decline, with the fall reaching even the evaluations of the current business scenario, signaling another month of weak results. A positive fact, however, is that the industry's inventory levels were lower than planned in Feb'24; this is particularly relevant in the case of manufacturing, which did not grow in the last two months and can be activated to rebuild inventories.

The full text is available in Portuguese.