Letter IEDI n. 1259—Two months of advance
In Feb'24, economic activity continued to expand in Brazil, but without help from the industry or expansion of services. For this reason, its intensity dwindled in relation to the turn of the year and remained positive with the contribution of retail trade.
From Jan'24 to Feb'24, after adjusting for seasonal effects, only retail sales increased among the large sectors of the domestic market. In its broad concept, which includes the branches of vehicles, auto parts, construction material and wholesale-retail, it registered 1.2%.
In the same comparison, industrial output changed -0.3%, largely due to the extractive sector (-0.9%). Real services revenue fell 0.9%, cancelling out the expansion registered in Jan'24 (+0.5%) and leading the sector to the worst performance of Feb'24.
As a consequence, the Central Bank's IBC-Br indicator, which acts as a proxy for the dynamism of GDP, registered +0.40% in Feb'24 (seasonally adjusted). Certainly a positive figure, but lower than the expansions of previous months: +0.70% in Dec'23 and +0.52% in Jan'24.
In any case, if we compare the beginning of this year with the beginning of last year, there was widespread growth in all major sectors and their branches. The bases of comparison helped those of them, such as the industry, which presented a sluggish path or a sequence of declines last year.
Thus, in the 1st two months of 2024 vis-à-vis the same period of 2023, it was the industry that showed the greatest progress, reversing the sign of its result. The 1.1% decrease of Jan–Feb'23 gave rise to a 4.3% expansion in Jan–Feb'24, always in relation to the same period of the previous year.
All its macro-sectors grew, including capital goods (+3.6%), whose output shrank considerably in 2023 as a whole (-11.2%). This was not a reality at the start of last year, when half of the macro-sectors were in the red.
Regionally, the industry also performed better. In the 1st two months of 2024, the 18 regional industrial parks monitored by the IBGE reported rises in production, with double-digit increases recorded by three of them (Amazonas, Goiás and Rio Grande do Norte). In the same period of 2023, only 33% of the parks were in black.
São Paulo, which has the largest and most diversified industry in the country, grew 4.8% in Jan–Feb'24 versus Jan–Feb'23, driven by the branches of beverages, petroleum products, electrical machinery and appliances, non-metallic minerals, and computer and electronic equipment. Other cases of more robust growth include Rio Grande do Sul, Rio de Janeiro and Amazonas.
In retail trade, the beginning of 2024 brought a stronger expansion for the sector in its narrow concept: 6.1% compared to 1.9% in the 1st two months of 2023, always in relation to the same period of the previous year. In its broad concept, the scenario of virtual stability of Jan–Feb'23 (-0.2%) gave way to an expansion of 8.2% in the 1st two months of 2024.
This recent dynamism is mainly due to two of its branches, which together represent almost ¼ of total broad retail: vehicles and auto parts (+14.1% in Jan–Feb'24) and pharmaceutical, medical, orthopedic and perfumery articles (+12.7%). Also noteworthy was the acceleration in sales of supermarkets, food, beverages and tobacco (+7.9%), supported by the increase in the real income of the population.
The service sector, in turn, was the only one whose dynamism fell in the comparison between the two periods in question. Its real revenue grew in the 1st two months of 2024, but at a slower pace than in Jan–Feb'23: 3.3% versus 4.9%, respectively.
This was mainly due to the branch of transport, its auxiliaries and storage (+4.9% in Jan–Feb'23 and +0.6% in Jan–Feb'24), but also due to services provided to households (+10.9% and +4.6%, respectively).
With these recent developments, there has been some convergence of performance, as suggested by the twelve-month figures compared to the same period of the previous year.
From this perspective, the industry progressed from -0.2% to +1.0% between Feb'23 and Feb'24, and retail from +1.3% to +2.3% in its narrow concept and from -0.5% to +3.6% in its broad concept. On the other hand, services decelerated from +7.7% to +2.2%, which may help to cool the service inflation rate that has worried the Central Bank.