Brazil: Industrial production rises in March, but consumption drop worries

RIO DE JANEIRO, BRAZIL – The National Confederation of Industry (CNI) released on April 19 the results of the industrial survey for the first quarter. The entity highlighted the strong growth of industrial production between February and March and the increased concern of entrepreneurs with the drop in consumption.

In March, industrial production rose to 54.4 points, which is above the dividing line between fall and growth. The index had not been above 50 points since December.

The movement is normal for the first quarter. Still, the CNI pointed out that the recovery this year, from 47.9 in February to 54.4 in March, “exceeds the expected acceleration in the period. The average of the historical series for March is 51 points.

Industrial employment, in turn, remained practically stable at 50.1 points. In February, the index that measures the evolution of labor supply in the industry had stood at 49.2 points, which means a drop in the number of vacancies offered. In March last year, the level was at the same 50.1 points.

The Utilization of Installed Capacity (UCI) increased by one percentage point, to 69%, from February to March 2022. The result is two percentage points above the average for March. The percentage has been on a growth path since January of this year.

MAIN PROBLEMS

According to the business community, the industrial survey also measures the main problems faced by the industry. With 58.8% of the mentions, the lack or the high cost of raw materials has remained the main concern for seven quarters.

However, the shortage of inputs has been losing strength as the industry’s main concern, stressed the CNI. Mentions of the problem fell 1.8 percentage points in the last quarter and dropped 8.4 percentage points compared to March last year.

Meanwhile, the concern with the drop in consumption is growing, which in the first quarter of this year figured in 25.5% of the business people’s answers. In the second quarter of 2021, this problem appeared in 19.4% of the mentions.

The Economic Analysis manager, Marcelo Azevedo, explains that, in isolation, the percentage does not seem so high, but the high number of mentions of the problem indicates that there is insufficient demand at a time when supply is starting to adjust. For the economist, “the problem of demand becomes more evident. It is a highly complex situation.”

The industry’s concern about rising interest rates has also been growing for four quarters. Between the last two quarters, the problem went from 14.2% to 20.8% of the mentions, the most expressive increase in the survey. At the end of last year, only 7.6% considered interest rates an obstacle to their business, according to CNI.

Mention of difficulties in transport logistics took 13.8% of the answers, compared to 11.8% in the previous quarter. It is the third consecutive quarter of increase. The second most mentioned problem continues to be the high tax burden, with 30.4% of the answers, down from 33.2% in the previous quarter.

With information from Agência Brasil