Brazil: Small industry performance improves, but raw material concerns

Brazilian micro and small businesses showed good performance in the second quarter of 2022 but are concerned about the lack or high cost of inputs used as raw material, according to a survey released today, August 1, by the National Confederation of Industry (CNI).

According to the Panorama of Small Industry, there is a perception of improvement in the financial situation of smaller companies compared to the same quarter of previous years.

“Businessmen remain optimistic, and the outlook for the small industry remains positive,” indicates the CNI document when informing that the “average performance of the quarter” in 2022 for the small industry was 47.4 points.

The result for the second quarter is above the one recorded in the first quarter of 2022 (45.5 points), as well as the average for the second quarter of 2021 (46.5 points).

In June, the performance index registered 47.5 points, a rise of 4.8 points compared to the average for June for previous years.

The Small Industry Panorama is a quarterly survey that lists four indicators: performance, financial situation, prospects, and confidence index. All indices range from zero to 100 points. The higher it is, the better the performance of the sector.

RAW MATERIALS

The indication of optimism, however, is accompanied by “concern with the lack or high cost of raw materials that continues to rise for the small industry,” which points to this problem as a “challenge for Brazilian micro and small industries.”

In the second quarter of this year, the lack or high cost of raw materials was the “most mentioned problem” with 51.8% of the citations in the ranking that covers small companies in the extraction, transformation, and construction sectors, followed by the high tax burden (35.8%). In third place, among the main problems the small industry faces is the concern with “insufficient domestic demand.”

“The problem [of lack or high cost of raw materials] remains in first place for all industrial segments and, despite having suffered a reduction in signings for transformation (-6.9 percentage points (pp) and for extractive and (-6.8 pp), the percentage increased for the construction industry (+5.4 pp) in Q2 2022,” the survey reports.

FINANCES AND PERSPECTIVES

For CNI, the Financial Situation Index for small industries had a “slight improvement”, scoring 41.2 points in the second quarter of 2022, which shows an increase of 0.2 points compared to the first quarter.

The Industrial Entrepreneur Confidence Index (ICEI) for small industries showed “relatively high and widespread confidence,” since the beginning of the year, confidence “continues to oscillate above the historical average of 52.8 points around 57.0 points,” the CNI reported.

Meanwhile, the Small Industry Outlook Index pointed to a drop of 0.9 points in July 2022, to 51.3 points. This index evaluates the entrepreneurs’ perceptions for the coming months.

The CNI survey is quarterly and is based on the analysis of small industry data collected in the Industrial Survey, the Construction Industry Survey, and the Industrial Entrepreneur Confidence Index (Icei). The surveys listen, every month, to about 900 entrepreneurs from small-sized companies.

With information from Agência Brasil