Brazil’s Industry Confidence Falls in August to Lowest Since 2023

Brazil’s Industrial Confidence Index (ICI), published by FGV IBRE, fell 4.4 points in August to 90.4, the lowest reading since October 2023. It was the sixth consecutive monthly drop this year, and the three-month average slipped 2.8 points to 94.0.

The decline was broad. Confidence fell in 15 of 19 industrial sectors. Companies reported weaker demand, down 2.0 points to 95.6, and the sharpest fall since 2022 in their assessment of business conditions, which dropped 6.1 points to 91.3.

At the same time, inventories increased to 106.2, the highest since November 2023. Any figure above 100 means firms hold more stock than they want, often a warning sign of slower future production.

Expectations worsened as well. The index for hiring plans fell 5.9 points to 91.2, the lowest since June 2020 when the pandemic disrupted activity. Business outlook over six months declined to 83.6, and planned production fell to 88.6, both extending a three-month downward trend.

Capacity use in factories held steady at 82.6 percent, but the mismatch between stable output and rising inventories signals a risk of cutbacks in the months ahead.

Two forces stand out behind the fall in confidence. Brazil’s central bank held its key Selic rate at 15.00 percent in July, keeping credit expensive.

Meanwhile, new U.S. import charges on Brazilian products took effect in early August, clouding external demand. Together, they pushed firms into a defensive stance, cutting hiring plans and reassessing production.

For Brazil, confidence below 100 means managers feel worse than average about current and future conditions. When that persists, companies reduce investment, slow hiring, and run down inventories instead of placing new orders.

This weakens supply chains and jobs, not only in industry but in transport, energy, and services linked to manufacturing. The story behind the numbers is clear. Factories are producing at normal capacity but stacking up unsold goods.

Demand looks too soft to clear those shelves quickly, and tight money makes expansion harder. Unless orders recover or financial conditions ease, Brazil risks ending 2025 with weaker industrial output and fewer new jobs.

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