Industrial production fell by 0.6% in October, fifth in a row

Affected by the scarcity of inputs and rising costs, Brazilian industrial production returned to a slide and dropped 0.6% in October, compared to September, reported this Friday (3) the IBGE (Brazilian Institute of Geography and Statistics) .

It was the fifth consecutive downturn in the sector, which had not occurred since 2015. The result was below market forecasts. Analysts consulted by the Bloomberg agency projected an advance of 0.8%.

“More than the result for the month itself, the sequence of negative results itself draws attention, five months of consecutive falls in production, a period in which it accumulates a 3.7% retraction,” said André Macedo, manager of the IBGE survey.

“Every month that industrial production is retreating, it moves further away from the pre-pandemic period. At this moment, it is 4.1% below the level of February 2020”, he amended.

The IBGE also informed that, in comparison with October 2020, industrial production decreased by 7.8%. In this clipping, the forecast of analysts was of a smaller fall, of 5%.

Throughout this year, until October, the indicator still accumulates high, 5.7%. In a 12-month period, the growth is also 5.7%.

These two results were more robust throughout 2021, which illustrates the loss of steam in production. In May, the accumulated result for the year was 13.2%. Already the 12 months reached 7.2% in August.

According to Macedo, part of the industry continues to suffer from scarcity of inputs and high production costs. Both factors took shape throughout the pandemic, as a reflection of the disarray of global production chains.

The production of industrial goods is also impacted by rising consumer inflation and a struggling labor market. The two obstacles, indicated Macedo, remove purchasing power from the Brazilian population.

“There is still a shortage of raw materials and production increases,” he said.

“On the domestic demand side, we have inflation at a higher level, decreasing family income, higher interest rates, higher credit prices and the job market is far from showing a more consistent recovery,” he added.

The 0.6% decline in industrial production in October reflects a widespread decline in 19 of the 26 sectors surveyed by the IBGE. According to the institute, the main negative influences came from extractive industries (-8.6%) and food products (-4.2%)

In the extractive sector, there was the impact of the drop in the production of iron ore and oil. Both came from positive results, according to Macedo.

In the case of food, the retraction is associated, in part, with the adverse climate. Throughout this year, Brazil experienced a drought and had records of frost. Weather extremes have harmed many crops, including sugarcane, coffee and corn.

The food industry also felt the effect of the suspension of Brazilian meat exports to China, recalled the IBGE analyst. The stoppage occurred after the registration of two atypical cases of mad cow in September.

In the monthly comparison, the production of industry, in general terms, grew only twice between January and October 2021. The advances occurred in January (0.2%) and May (1.2%).

In the assessment of consultant Alexandre Schwartsman, former director of BC (Central Bank), the weak domestic demand helps to explain the situation in the sector, in addition to the difficulties in supply chains.

According to the economist, there is also a shift in consumption from goods to services. The services sector was hit hardest in the initial phase of the pandemic and is now spurred on by the drop in restrictions on the movement of people.

“At the beginning of the crisis, even if you wanted to spend on some services, you couldn’t. “, it says.

For Schwartsman, the result of October suggests a weak beginning of the fourth quarter for the Brazilian economy. “We continue with a stagnant economy and weak demand.”

Of the 26 industrial sectors, 17 had, in October, a production level below the pre-pandemic one of February 2020.

The maintenance, repair and installation of machinery and equipment segment registered a level 30.2% lower than the pre-crisis level. It is the biggest negative distance.

The second is verified in motor vehicles, trailers and bodies. The branch is 19.7% below pre-pandemic.

In January 2021, the industry had seven segments at a level below February 2020. The increase in the number of activities in this situation also illustrates the loss of breath of factories throughout the year.

In October, 69% of companies consulted by the CNI (National Confederation of Industry), in the general industry, indicated difficulties in obtaining domestic inputs. The data was released on Thursday (2) by the entity.

To complicate the picture, scarcity has been accompanied by soaring prices. In October, industrial inflation accelerated to 2.16%, the strongest in six months, according to the IPP (Producer Price Index).

The index is also calculated by IBGE. In 12 months, the increase is 28.83%. The IPP measures the change in prices at the entrance of factories, without the effect of taxes and freight.