Economic situation brings down sectors that pumped in the pandemic

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Economic situation brings down sectors that pumped in the pandemic

In the last two years, social isolation has caused certain economic sectors to register above-average growth. Home products, appliances and supplies for renovations are examples of items that have performed exceptionally, and that are now experiencing a kind of post-pandemic hangover.

With the reduction of distancing measures, the consumption profile underwent transformations, helping to curb the good performance of the segments that boomed during the quarantine. But changing habits is not the only explanation.

In times of high inflation and loss of purchasing power, consumers also had to reconsider products that fit in their pockets. On the manufacturers’ side, the high interest rate, the expensive dollar and the international scenario made production more expensive — creating an unfavorable economic situation for business.

A recent report on the electronics market helps to understand this context. From January to May 2022, the sector saw a 19% drop in retail sales compared to the same period last year.

In the first five months of this year, 31.49 million units were sold, compared to 39 million in 2021. Taking an average of all product lines, the decline is even greater: 24%.

According to Eletros (National Association of Electronics Manufacturers), the sector had surprising results during the pandemic — except in the first few months.

Social isolation has made consumers invest in new products for the home, such as dishwashers, vacuum cleaners, air fryers, as well as televisions and white goods (which include refrigerators, stoves and washing machines).

“People transformed the home environment into a school, leisure, work environment. Everyone needed to organize the house to meet these other areas and needs”, says Jorge Nascimento, executive president of Eletros.

About a year ago, however, the performance changed its trajectory. The air conditioning sector, for example, had 36% lower sales in the first five months of 2022 compared to the same period last year. In the case of televisions, the drop was 19%.

According to Nascimento, the results are directly linked to the population’s loss of purchasing power.

In the last 12 months, inflation measured by the IBGE (Brazilian Institute of Geography and Statistics) reached 11.89%. Since September 2021, the cumulative level has been in double digits, i.e. above 10%.

September, by the way, is the month in which the sector noticed the turnaround in performance. “It was when we started to notice a drop, and right at a time that is our seasonality. The second semester is usually better, because it has payment of the 13th salary, Black Friday, Christmas. All this helps to heat up the market”, says Nascimento.

In addition to rising prices, the following also enter the equation: the increase in interest rates —which inhibits the search for credit—; the dollar at a high level; and the high cost of inputs and international freight. With the relaxation of sanitary measures, the electronics market also began to compete for part of the income of families with services and tourism.

“The electronics sector is a consumer goods sector. So, if the economy is doing well, we immediately show a positive result. When the economy is going bad, we are the first to feel the fall”, he says.

Another segment that has been falling in relation to the bonanza of the pandemic is furniture. In the first months of 2021, the market was experiencing one of the biggest heating moments in its history.

The logic is similar to what happened with electronics. With social isolation, people began to buy more products for the home, whether for comfort or out of necessity – such as equipping the house for the home office, for example.

In addition, emergency aid allowed an injection of resources into the economy that leveraged the sector’s numbers.

However, a recent report by Abimóvel (Brazilian Association of Furniture Industries) indicates a loss of breath. In the first five months of 2022, furniture production fell by 21.8% compared to the same period last year.

In May, apparent domestic consumption — the number of parts available on the market — is 22.6% lower than in 2021 and, in retail, sales have fallen by 9.7% in the last 12 months.

Just as the purchase of furniture has retreated, the market for renovations is also going through a cooling off. In April 2021, a report by the Sheet showed that low interest rates and the insecurity caused by the pandemic had been boosting works to improve properties, as a form of investment.

At that time, the Selic was at 2.75% per year, a scenario quite different from the current 13.25%.

The change in the situation is reflected in the results of the input sector. Cement sales, for example, fell by 2.7% in the first half of 2022 compared to the same period last year.

According to Snic (National Union of the Cement Industry), the month of June reached 5.2 million tonnes sold, a loss of 5.3% compared to 2021.

According to the entity, the worsening of the economic environment — with high inflation and salary mass at worrying levels — combined with commodity prices and geopolitical instability have impacted the economy as a whole.

“Given this scenario, the cement industry’s expectation of ensuring the gains obtained from 2019 to 2021 is heading towards an undesirable frustration”, says Paulo Camillo Penna, president of Snic.

For the coming months, the outlook is not positive either. The sector expects an even more turbulent economic and political scenario and already estimates a drop between 1% and 2% in 2022.

Some sectors did not fall, but braked

Another market that exploded during the pandemic was that of pets. In 2021, the segment surpassed the mark of R$ 51.7 billion in revenue for the first time, an increase of 27% compared to the previous year.

Although the 2022 results are not in the red — as they are for electronics, furniture and cement — the growth rate has started to recede.

According to Instituto Pet Brasil, the market is expected to increase by 14% in 2022, with revenues of around R$59 billion.

Were it not for the economic situation, the scenario could have been even better. A survey carried out by C6 Bank in partnership with Ipec showed that inflation forced 44% of Brazilians who have pets to reduce spending on pets.

Consumers took items such as toys and sachets from their carts. In addition, almost half (48%) changed the type of feed for cheaper options.

A similar scenario happens with the delivery market. The channel had already been growing in recent years, but the health crisis accelerated this pace to an exponential level.

“In this new moment, it is natural that delivery does not grow at the same speed, but we do not realize that there is a setback”, says Fernando Blower, executive director of the ANR (National Association of Restaurants)

In his view, the transformation was structural, that is, the consumer changed his habits and started to use this channel more – which tends to be perennial.

“It is a positive moment, since we have managed to recover billing and customers, but of alert and concern due to food inflation and the debt that we still carry from the crisis”, he says.

Plant market swings, but remains steady

Absolute success during the confinement period, house plants are no longer experiencing that first-year pandemic boom, but the market as a whole is still strong.

According to Renato Opitz, director of Ibraflor (Brazilian Institute of Floriculture), the segment of flowers in vases and plants in general —such as ferns and succulents— had an excellent performance in the last two years, and now it has started to cool down.

“Nobody stopped buying plants. People who didn’t have this habit before started to have it and liked it. [A queda] It’s more a matter of market accommodation and competition with other activities — such as tourism, gastronomy, theater, cinema — that did not exist before”, he says.

Opitz also mentions the current economic situation, in which the loss of purchasing power naturally causes a decrease in the consumption of flowers and plants. “The scenario is not bad, the biggest problem is the high cost of production”, he says.

However, looking at the sector as a whole, the situation seems to have reached a balance. That’s because the cut flower market — which includes party and wedding decorations — sank during the health crisis, but has resumed strongly after restrictions were relaxed.

The parties that were postponed are now piling up, to the point where it is difficult to meet all the demand.

The rise in this segment ends up offsetting the lower demand for houseplants. “If we put everything in the balance, the current period is better than before the pandemic,” she says.

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