Brazil’s industrial production falls 0.4% in June after four months of highs

Brazilian industrial production fell 0.4% in June after four consecutive months of positive figures. The last decline was recorded in January: 1.9%.

The sector has seen a decline of 2.2% in the first half of the year and 2.8% over 12 months. The data are part of the Monthly Industrial Survey (PIM) released yesterday (2) in Rio de Janeiro by the Brazilian Institute of Geography and Statistics (IBGE).

According to the study, including the June result, the sector is still 1.5% below the pre-pandemic level recorded in February 2020 and 18% below the record level of May 2011.

According to research director André Macedo, despite four consecutive months of growth, in which a cumulative peak of 1.8% was reached, the sector has not yet recovered from the January loss. The June result accentuates the negative balance of the year (-0.5%) compared to the December 2021 level.

“This reflects the difficulties that the industrial sector continues to face, such as increased production costs and limited access to inputs and components to produce final products. In this sense, the industry’s behavior has been characterized by plant closures, reductions in working hours, and the granting of collective leave,” he said.

For Macedo, high-interest rates and inflation are among the factors that have negatively affected demand in the industry. In addition, there is a decline in family income and unemployment, although the unemployment rate has fallen in recent months. The contingent of unemployed people in the country is about 10 million people.

“The characteristics of the newly created jobs indicate a precarious labor market, which is reflected in the income mass, which is not growing. All these aspects are important facts and contribute to explaining this negative balance of the industrial sector,” he noted.

ACTIVITIES

The decline in June compared to May extended to most of the industries studied in the survey. The segment of pharmaceutical chemicals and pharmaceutical products (-14.1%), which had reached a high of 5.3% in the previous two months, had the greatest impact.

According to Macedo, this segment has higher volatility of prices. “At the beginning of the year, there was a decline in the production of pharmochemical and pharmaceutical products, and in April and May, this peak was reached. Due to the cumulative growth, the segment had a higher basis for comparison, which justifies this double-digit decline,” he said.

The coke, petroleum products, and biofuels sector, down 1.3%, was also a major factor in June’s results. “In this activity, alcohol, and petroleum derivatives had the largest negative impact. But despite the decline, this segment is 4.5% above pre-pandemic levels, meaning it is behaving differently than the industry average,” he concluded.

The other contributors to the sector’s negative result were machinery and equipment (-2%), metallurgy (-1.8%), IT equipment, electronic and optical products (-2.8%), and other transport equipment (-5.5%).

Compared to May, nine activities were expanded. The highlights in the industry’s overall performance were, in positive terms, the manufacture of motor vehicles and parts (6.1%) and the extractive industries (1.9%).

“The vehicle sector added to the growth of May (3.8%), but could not compensate for the previous losses. The balance of this activity is still negative, as it is still 8.5% below pre-pandemic levels,” Macedo pointed out.

He added that in extractive industries, the advance offset the previous month’s loss. “This growth was weighed down by a higher pace of iron ore production. Before the decline in May, the extractive sector had seen three months of positive rates and 6.5% growth,” he said.

The pulp, paper, and paper products (4.5%), apparel and accessories (7.1%), food (0.6%) and perfumes, soaps, detergents, and personal care products (4.3%) segments also grew in June.

Of the four major economic categories, three were down from May. The capital goods manufacturing sector posted the largest decline (-1.5%), following a 7.5% gain in the previous month. The intermediate goods sector contracted for the second month in a row by 0.8%, bringing the cumulative loss to 2.3%.

The 0.7% decline interrupted two months of growth for semi-finished and nondurable goods. During this period, they reached a peak of 2.8%. The only increase in June was in the consumer durables segment (6.4%), reinforcing the previous month’s expansion (4.1%).

COMPARISON WITH JUNE 2021

Compared to the same month last year, the industrial sector contracted by 0.5% and showed negative results in 14 of the 26 sectors surveyed. Extractive industries (-5.4%) had the largest negative impact on results, pressured by the decline in crude oil and iron ore production. Metallurgy (-8.3%) and pharmaceutical products (-19.6%) also affected the indicator.

The sectors of non-metallic minerals (-6.9%), metal products (-6.0%), other chemical products (-2.6%) and machinery, apparatus and electrical equipment (-6.3%) also recorded a decline.

Other significant decreases were recorded in rubber and plastic products (-3.4%), textiles (-8.3%), wood products (-8.4%), furniture (-9.3%), and other products (-8.3%), which negatively affected the index.

Among the 12 industries that recorded an increase in production and had the greatest impact are coke, petroleum products and biofuels (8.6%), motor vehicles, trailers, and buses (5.9%).

The survey also shows that higher production of diesel oil, fuel oil, and naphtha for petrochemicals influenced the growth of the first sector. In the case of vehicles, the increase was due to the expansion of production of passenger cars and tractor units for trailers and semi-trailers.

Macedo also said that after the May result interrupted nine consecutive months of decline in this indicator, there is a return to negative territory. “In this comparison with the same period last year, there is also the sign of the distribution of cases among the activities studied.

But despite the decline in June, the intensity of the decline has decreased: in the first quarter of the year, there was a cumulative loss of 4.4%, and in the first half of the year, the decline was 2.2%. This decrease in the volume of losses is also observed in all major economic categories,” he concluded.

With information from Agencia Brasil