Brazil’s Industrial Production Slumps 9.1 Percent; Worst March in 18 Years

RIO DE JANEIRO, BRAZIL – Brazilian industry was severely affected by the coronavirus pandemic in March, with widespread losses and the lowest production level for the month in 18 years, pointing to even greater losses in April.

Brazil’s industrial production plummeted 9.1 percent in March compared to the previous month, amid the shutdown of plants and companies across the country as a measure to contain Covid-19.

This is the poorest result since the 11 percent drop in May 2018, when truckers were on strike nationwide. It also represents the lowest reading for the month of March since 2002.

Data released on Tuesday by the Brazilian Institute of Geography and Statistics (IBGE) also show that, compared to March last year, there was a 3.8 percent loss for the fifth straight month.

Both results were far worse than projected in a Reuters survey of economists with a 4.7 percent drop in monthly variation and a 1.6 percent drop on an annual basis.

The country’s industrial sector even experienced an improvement earlier in the year, with two successive months of gains, but the whole scenario was disrupted by the pandemic’s impact in the midst of collective vacations, shutdowns, lower demand, and social isolation.

“The drop is stronger in the last third of March and continues into April and beyond. If there are in fact more companies in April with collective vacations and shutdowns, it’s only logical to assume that April will show a greater decline in domestic production”, research manager, André Macedo said.

“This will have a negative impact on the consolidated 2020. It will be months with significant declines for industry (March, April, and May)”, he added. “2020 will be a landmark year for industry”.

Losses in March were generalized and sharp among economic categories, the steepest of which was the 15.2 percent drop in Capital Goods, an investment measure – the sharpest drop since May 2018.

Consumer Goods production fell 14.5 percent, mainly driven by lower vehicle production. Intermediate Goods lost 3.8 percent, also a record since May 2018 and interrupting three months of positive results.

23 out of 26 sectors surveyed reported a drop

Among the sectors surveyed, 23 out of 26 reported negative results: the greatest negative was the 28 percent drop in motor vehicles, trailers, and bodies due to the pressure of production shutdowns and interruptions in several production plants due to the coronavirus..

This drop was the steepest since May 2018 and wiped out the 7.8 percent growth accumulated by the industry in the first two months of 2020. Other relevant negative contributions came from clothing and accessories (-37.8 percent), beverages (-19.4 percent), leather, travel goods, and footwear (-31.5 percent).

The only three sectors that recorded growth in the month were printing and recording reproduction (8.4 percent), perfumery, soaps, cleaning, and personal hygiene products (0.7 percent) and maintenance, repair, and installation of machinery and equipment (0.3 percent). The three reported an increase in production in March, continuing the positive behavior observed in February and accumulating gains of 16.2 percent, 4.3 percent, and 0.9 percent, respectively, according to the IBGE.

“The March result has a widespread downward trend and this is similar to that of May 2018, with the trucker strike. Isolation is at the root of the result, which leads to the interruption and stoppage of several sectors of the Brazilian industry,” Macedo added.

The IBGE further stressed that the period of confinement did not include the whole month of March and varied throughout the country.

Uncertainties have taken hold of the Brazilian economy due to the coronavirus outbreak, with many workers in quarantine and risking unemployment.

In April, Brazilian industry confidence as measured by the FGV (Getulio Vargas Foundation) experienced the greatest drop ever recorded in the historical series, reaching a new record low with the economic impact of the Covid-19 pandemic stifling entrepreneurs’ mood and increasing uncertainty over the sector’s future.

The Focus survey conducted by the Central Bank along with a hundred economies points out that the outlook for the economy is for a 3.76 percent contraction this year, with industrial production shrinking 2.75 percent.

Source: Estadão Conteúdo