Brazil Industry Confidence falls for the 5th consecutive month, to the lowest level since August 2020 -FGV

RIO DE JANEIRO, BRAZIL – The Industry Confidence Index (ICI) calculated by the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre) fell for the fifth consecutive month, 2.0 points in December, to 100.1 points, the lowest level since August 2020 (98.7 points). In quarterly moving averages, it maintained the negative trend by falling 2.1 points.

“The December result is pulled by a less favorable evaluation about the current situation, as well as by more cautious expectations for 2022. This result is explained by problems that extended throughout the year, such as pressure on costs, insufficient inputs, and high uncertainty.

Besides this, unemployment and inflation compress household demand, reducing demand, which influences the evaluation of the current situation and makes projections for 2022 more cautious. Regarding the shortage of inputs, a normalization is expected as of the second half of next year.

In this context, the sector ends 2021 with unresolved bottlenecks, leading to lower expectations,” comments Claudia Perdigão, an economist at FGV Ibre, in a comment in the report.

The month’s result was influenced by a worsening of both the evaluations about the current situation and the perspectives for the coming months. The Present Situation Index (ISA) fell 2.7 points, to 101.0 points, the lowest value since August 2020 (97.8 points). The Expectations Index (IE) fell 1.2 points to 99.1 points, the lowest level since May of this year (99 points).

Among the items that make up the ISA, the worst performance was in the indicator that measures the present business situation, which fell 6.4 points to 95.8 points, the lowest value since July 2020 (87.0 points).

Of the indicators that make up the IE, the employment forecast for the coming months was the one that most influenced the drop in the ICI in December, when it fell 2.0 points to 101.8 points, the lowest level since May (101.5 points).

After last month’s high, the outlook for production in the next three months fell 1.1 points to 98.8 points. The business outlook for the next six months remains on a negative trend for the fifth consecutive month, falling 0.6 points in December to 96.6 points, the lowest since September 2020 (96.5).

The Level of Capacity Utilization (Nuci) dropped 1.0 percentage points to 79.7%, the same level observed in August 2021.