Industrial production drops 1.3% in July, frustrates expectations and is below pre-pandemic levels

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SAO PAULO – Industrial production fell 1.3% in July compared to June, after falling 0.2% in the previous month (data revised against stability previously released). The data were released this Thursday (2) by the Brazilian Institute of Geography and Statistics (IBGE).

With the result, the industry accumulates a fall of 1.5% in two months, after a rise of 1.2% in May. In the annual comparison, the increase was 1.2%.

The data was worse than expected. The expectation of analysts heard by Refinitiv was a drop of 0.5% in the monthly comparison, and an increase of 1.8% in the annual comparison.

In the year, the industry accumulates an increase of 11% and, in twelve months, of 7%. With the July result, industrial production was 2.1% below the pre-pandemic level of February 2020.

The July retreat reached two of the four major economic categories and 19 of the 26 sectors surveyed. “In general terms, the behavior of July is not much different from what we have been observing throughout this year, since in the seven months, in five there was a decrease”, explains André Macedo, manager of the survey.

According to Macedo, this result remains linked to the effects of the Covid-19 pandemic. “At the beginning of the year, there were closures and greater sanitary restrictions in certain locations, which affected the production process. With the advance of vaccination and the relaxation of restrictions, industrial production now feels the effects of the increased cost and disarray of the entire production chain”, he observes, recalling that in January 2021, industrial production reached 3.5% above the pre-pandemic threshold.

According to IBGE, the effects of domestic demand also contribute to the result. One of the most important negative influences of industrial production in July was the beverage sector, which dropped 10.2%, interrupting three consecutive months of positive rates, when it accumulated an increase of 11.7%. Another sector that pressured the result was food products, with a drop of 1.8%, the second in a row, accumulating a loss of 3.8%.

“People have difficulty in getting a job, with a significant contingent outside the labor market, the precariousness of employment and the retraction in the mass of income, as shown by the Continuous National Household Sample Survey (PNAD), released on Tuesday (31) by the IBGE”, enumerates Macedo, also highlighting the contribution of the inflationary process that has been reducing household income and daily consumption, as exposed by the Broad National Consumer Price Index (IPCA).

“The result of the industry is within the scope of the results of income, employment and inflation shown by the other surveys”, he observes.

Other important negative contributions to the July PIM result came from the sectors of automotive vehicles, trailers and bodies (-2.8%), machinery and equipment (-4.0%), other transport equipment (-15, 6%) and extractive industries (-1.2%). Among the seven activities with growth in production, coke, petroleum products and biofuels (2.8%) exerted the main positive impact, with the third consecutive month of increase and accumulating, in this period, a 10.2% increase.

Among the major economic categories, there were falls in durable consumer goods (-2.7%) and intermediate goods (-0.6%), with the first marking the seventh month followed by a fall and accumulating in this period (loss of 23, 4%) and the second retreating 3.2%, in the fourth consecutive month of decline. The sectors of capital goods (0.3%) and semi and non-durable consumer goods (0.2%) had positive results, with the former marking the fourth consecutive expansion (total of 5.9% in the period) and the second, returning a small part of the 1.7% indentation in June.

annual comparison

Compared to the same month in 2020, the industry grew 1.2%, with positive results in two of the four major economic categories, 14 of the 26 branches, 46 of the 79 groups and 54.4% of the 805 products surveyed. It is worth mentioning that July 2021 had one less business day than July 2020 (22 against 23).

Among activities, the main positive influences came from automotive vehicles, trailers and bodies (21.2%), metallurgy (24.8%) and machinery and equipment (26.2%).

Among the twelve activities in decline, food products (-10.3%) exerted the most intense negative influence. Among the negative contributions, the highlights were beverages (-15.2%), mining and quarrying (-2.7%), furniture (-14.4%), perfumery, soaps, cleaning products and personal hygiene (-9.8%), computer equipment, electronic and optical products (-7.1%) and machines, appliances and materials.

Macedo ponders that these rates are largely due to the low basis of comparison, since in 2020, industrial production was greatly affected by social isolation to contain the Covid-19 pandemic and reached historical negative levels.

(with IBGE News Agency)

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