January saw a notable surge in Brazilian industry confidence, highlighting improvements in both present and future business prospects.
The Getúlio Vargas Foundation (FGV) reported this upswing on Monday (29).
The Industry Confidence Index (ICI) rose by 1.8 points to 97.4, marking its fourth consecutive increase. This level is the highest since August 2022, when it hit 100.0.
The Current Situation Index (ISA), which reflects the industrial sector’s current state, also soared.
It jumped 2.8 points to 97.8, reaching its highest since September 2022’s 100.3.
Economist Stéfano Pacini from FGV links this rise to a boost in demand and effective stock management. For the first time since 2022, these factors have balanced out.
Furthermore, the Expectations Index (IE), measuring future business outlook, climbed 0.8 points to 97.0.
Pacini observes a positive shift in business environment expectations and projected production.
He connects this progress to factors like easier credit, inflation management, and rising demand at the year’s start.
The Selic rate, Brazil’s benchmark interest rate, ended the previous year at 11.75%. This followed a series of four 0.50 percentage point cuts by the Central Bank.
Current market projections anticipate a similar rate cut at the upcoming Monetary Policy Committee (Copom) meeting.
Last week’s data from IBGE also plays a crucial role. It showed that IPCA-15, an inflation indicator, began 2024 slower than expected.
This follows 2023’s trend, where inflation remained below the targeted ceiling.
These interconnected factors signal a robust and optimistic outlook for Brazil’s industrial sector in 2024, reflecting broader economic recovery and stability.
Background
A week ago, President Lula of Brazil unveiled the ‘Nova Indústria Brasil’ (NIB) policy, designed to rejuvenate the country’s industrial sector.
The plan allocates a substantial R$300 billion (about $60.6 billion) for industrial development, targeting completion by 2026.
Of this, R$106 billion (approximately $21.41 billion) was previously announced in July 2023.
The NIB sets ambitious goals, aiming to enhance the agro-industrial sector’s GDP contribution to 50%.
It also plans to mechanize 70% of family farming using local machinery.
Furthermore, the initiative strives to produce 70% of national health necessities domestically, such as medicines and medical devices.