Industrial production drops 1.3% in July and returns to below pre-pandemic levels, IBGE points out | Economy

Brazilian industrial production fell 1.3% in July, compared to June, returning to below the pre-pandemic level, point out the data released this Thursday (2) by the Brazilian Institute of Geography and Statistics (IBGE).

“With the July result, industrial production was 2.1% below the pre-pandemic level of February 2020”, highlighted the IBGE. In January, it was 3.5% above what was observed before the health crisis.

The research manager, André Macedo, highlighted that “considering only the months of July, this 1.3% drop was the most intense since July 2015, when industrial production had retreated -1.9.” He also emphasized that this result leaves the sector at the lowest level since July last year.

Also according to Macedo, the current level of the industry is 18.5% below the historic peak of industrial production, reached in May 2011, and equivalent to what was observed in January 2009.

  • July Monthly Industrial Survey Highlights:
  • result was driven by the low performance of beverage and food production;
  • effects of the pandemic on the economy as a whole slow down the production chain;
  • compared to July last year, production grew 1.2%;
  • in the year, the sector accumulates an increase of 11%;
  • indicator accumulated in 12 months advanced again, to 7%;

With the result of July, industrial production returned to below pre-pandemic levels — Photo: Economy/G1

The June result was revised by IBGE. Instead of the null change (0.0%) previously disclosed, there was a drop of -0.2% compared to May.

Effects of the pandemic on the production chain

According to the research manager, the predominance of negative rates in the industry in 2021 – there were five drops in seven months – “has the pandemic and all its effects as a backdrop.”

  • ‘Owner’ of 1/5 of GDP, industry faces difficulties in recovery; see main barriers

Macedo highlighted that at the beginning of the year the sector was once again directly impacted by the sanitary crisis, as there was a resurgence of measures to restrict the movement of people. In the following months, the advance of vaccination and the flexibility of measures were not enough for the resumption of industrial production, given the conjunctural effects on domestic demand.

That’s because, according to him, the crisis in the labor market – with about 14.4 million unemployed, job insecurity and retraction of the wage bill – associated with the constant rise in inflation directly impacts the population’s income, curbing consumption.

“The result of the industry is within the scope of the results of income, employment and inflation”, emphasized Macedo.

The negative result of July reached two of the great economic categories and was disseminated among the 26 branches – 19 of them had a drop in the month.

Among the major economic categories, the main negative influences in the month came from durable consumer goods, which had the seventh consecutive negative result, and intermediate goods, which had the fourth consecutive fall.

Capital goods had the fourth consecutive growth, while semi and non-durable consumer goods increased by 0.2%, recovering part of the loss of 1.7% observed in June.

  • July results, compared to June, by large category:
  • Durable consumer goods: -2.7%
  • Intermediate goods: -0.6%
  • Capital goods: 0.3%
  • Semi-durable and non-durable consumer goods: 0.2%

Drink and food pressure

A reflection of the low domestic demand in the July result can be seen, according to the IBGE, by the low performance of the production of beverages and foodstuffs, activities that exerted the main negative influences in the month.

The beverage branch had a drop of 10.2% after three consecutive months of high, when it accumulated a gain of 11.7%. Food products declined by 1.8%, the second negative fall leading to an accumulated loss of 3.8% in the period.

Other important negative contributions to the July result came from the subsectors 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, the highlight was coke, petroleum products and biofuels, which had a high of 2.8% – it was the third consecutive month of progress, with accumulated growth of 10.2% in the period.

Dynamism in the year-to-year comparison

In comparison with July 2020, industrial production increased by 1.2%. It was the 11th consecutive positive rate on this basis of comparison and the most intense for a month of July since 2018, when the increase was 4%.

Therefore, the indicator accumulated in 12 months increased to 7%, reinforcing the dynamism of the sector.

The research manager considered, however, that these rates are due, in large part, to the low basis of comparison, since in 2020, industrial production reached historical negative levels in view of the measures to contain the advance of the pandemic.

Indicator accumulated in 12 months shows dynamism of the industrial sector — Photo: Economy/G1

The positive result in comparison with July of last year reached two of the four large economic categories and 14 of the 26 sectors surveyed.

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

Distance from pre-pandemic plateau

The research manager pointed out that, although the sector as a whole has retreated to a level below the pre-pandemic period, two of the four large categories of the industry surpassed the level of production observed in February 2020 – capital goods (16.4 %) and intermediate goods (0.7% above).

Durable consumer goods and semi-durable and non-durable consumer goods are still 18.2% and 7.1% below the pre-crisis level, respectively.

The day before, the IBGE showed that the Brazilian economy shrank 0.1% in the 2nd quarter, with the industry registering a drop of 0.2% compared to the first 3 months of the year.

The industry has been affected by the lack of inputs and the rise in the prices of raw materials and costs such as electricity. And the scenario for the coming months promises to remain challenging: according to a survey by the Getulio Vargas Foundation (FGV), confidence in the sector fell back in August.

Despite the advance of vaccination against Covid-19 and the end of restriction measures in much of the country, persistent inflation, political tension and “fiscal risks” (sustainability of public accounts) have raised the level of uncertainty in recent weeks. about the pace of the resumption and provoked downward revisions of economic forecasts.

The financial market’s expectation for economic growth in 2021 was reduced from 5.27% to 5.22%, according to the latest Focus survey by the Central Bank. For 2022, the average of the projections is at 2%, but part of the analysts already sees a growth closer to 1.5%.

Industry registers fall of 0.2% in the second quarter

Industry registers fall of 0.2% in the second quarter