Industry, construction and trade GDP remains below 2014 levels

Three representative sectors of the Brazilian economy that stood out in previous PT governments still continue to produce below the levels seen in 2014, when the country entered one of the biggest recessions in its history: manufacturing industry, commerce and construction.

These activities were responsible for 33% of the value added to GDP (Gross Domestic Product) at the beginning of the last decade. In the last three years, this participation was 29%.

In the IBGE National Accounts, the manufacturing industry and construction are included in the large industrial sector, along with the extractive segment and activities such as electricity, water and sewage. Trade is accounted for as part of the services group.

The Brazilian manufacturing production level is around 15% below the historical series peak, which was reached in 2013. The sector’s decline, therefore, started before the 2014-2016 recession.

Construction and trade had their peaks in early 2014. The former is still more than 20% below that level. The second maintains a 5% lag.

These results contrast with the behavior of agriculture, the sector that has grown the most since the beginning of the IBGE historical series, which began in 1995, and was also the first to recover from the recession. Services as a whole had their recovery trajectory postponed because of the pandemic, but returned to pre-crisis levels in the second half of 2022.

Construction

Among the three sectors that have not yet returned, construction is the one that suffered the greatest loss of share in GDP in recent history, from 6.4% in 2013 to 3.3% in 2021. The fiscal crisis that resulted in program cuts of investments and popular housing made it impossible to maintain the high level of production in the sector achieved a decade ago.

José Carlos Martins, president of CBIC (Brazilian Chamber of the Construction Industry), says that Brazil currently has large infrastructure projects in progress, but which take time to bear fruit, and works that demand low resources, such as the construction of squares and asphalting of avenues.

“There is a lack of investment in the average thing. The road that gives access to Dutra, the side road, the bridge, the housing complex”, says Martins. “For that, it needs to have public investment again. But it’s no use having public investment without fiscal responsibility.”

In the last two years, the sector has grown twice as much as GDP. It may grow triple in 2023, according to the entity’s projection. Martins says that the sector reached 3 million workers with a formal contract at the peak. Vacancies dropped to 2 million at the peak and are now at 2.5 million.

Industry

Another segment with no prospect of returning to its peak is the transformation or manufacturing industry, which came to represent more than 20% of the Brazilian GDP in the 1970s.

A work by economists André Nassif and Paulo Morceiro shows that this de-industrialization is not a worldwide trend. The growth rate of value added by the sector fell in the last decade in Brazil, but advanced in the average of the most representative economies, a result driven by the emerging China and India. In some developed countries, such as the USA and Japan, it was practically stable.

“Brazil is a particular case. The participation of the manufacturing industry in the world GDP does not have a downward trend. It is relatively stable. If you exclude China, there is a very small reduction. There is no process [global] of deindustrialization”, says Rafael Cagnin, economist at IEDI (Institute of Studies for Industrial Development).

He claims that other countries that also experienced rapid deindustrialization, such as the United Kingdom and Australia, had already reached a high level of development before this occurred. This is not the case in Brazil. In those two economies, industry has shrunk, but it has become more technology-intensive and more value-added.

“Brazil has the worst case of premature deindustrialization. One of the most intense processes in the world, which occurred before the country became rich and which affected the most technologically intensive sectors, which today are the basis of industry 4.0”, says the Economist at IEDI.

For him, the elected government can follow in the footsteps of other economies that seek reindustrialization, which involves a State with the capacity to articulate and coordinate with the private sector.

Business

Commerce is another sector that has taken longer to recover from the 2014-2016 recession, although it is close to reaching the level of the time. Since 2012, it has had a weight in the economy that exceeds that of the manufacturing industry — around 14% of value added to GDP and 20% of participation in the services group as a whole.

The CNC (National Trade Confederation) estimates that the sector should close 2022 with growth close to 1.2%, practically the same result as the previous two years, in a scenario of high interest rates and still high inflation.

The value is well below the performance of the Brazilian GDP, whose growth this year is estimated at 3.1% and should remain at 1.6% on average for 2020-2022.

According to the CNC, almost two and a half years have passed since the beginning of the health crisis, the sales volume is still around 1% above that observed in February 2020.