Industrial production rises in 2021, but level is similar to 2009

After two years of decline, Brazilian industrial production started to grow again, with an increase of 3.9% in the accumulated of 2021, informed this Wednesday (2) the IBGE (Brazilian Institute of Geography and Statistics).

The result, however, is largely associated with a weakened basis for comparison. In 2020, In the initial year of the pandemic, the indicator had fallen by 4.5%, after falling 1.1% in 2019.

Even with the positive result in 2021, the highest since 2010 (10.2%), factory production was unable to recover the pre-coronavirus level. In December, it was 0.9% lower than in February 2020, before the effects of Covid-19.

According to André Macedo, IBGE research manager, the current level of industrial production is similar to that of the beginning of 2009. At the time, the global economy was trying to recover from the 2008 crisis. The comparison reinforces the sector’s difficulties to advance in the country.

In the monthly cut, industrial production rose 2.9% in December, compared to November 2021, pointed out the IBGE. The rise came after stagnation (0%) in the previous month, which interrupted the sequence of five drops in the indicator.

December’s performance surprised the financial market. Analysts consulted by the Bloomberg agency projected an increase of 1.6% compared to November.

Macedo said that the growth brings a positive signal to the industrial sector. The result, however, is also closely associated with a weakened basis for comparison, evaluated the technician.

This Wednesday, the IBGE also reported that, in relation to December 2020, factory production fell by 5%. In this cut, analysts’ estimates signaled a greater retraction, of 5.9%.

Macedo recalled that, even with the high accumulated in 2021, the industry began to show signs of loss of breath throughout the year.

“In 2021, there was a decreasing characteristic throughout the year, since there was an accumulated gain of 13% in the first half, and, later, the industrial sector showed a reduction of breath”, he said.

In the second half, production fell by 3.4%. “The positive results of the first months of the year were related to a very depreciated basis of comparison, since in 2020 there were very intense losses for the industry”, indicated Macedo.

In the 12-month period of 2021, factory production had positive results in 18 of the 26 activities investigated by the IBGE. The highlights came from automotive vehicles, trailers and bodies (20.3%), machinery and equipment (24.1%) and metallurgy (15.4%).

“It is a year in which the industry grows over a period of great loss. This is also a characteristic of the activity of motor vehicles, which, in 2020, had accumulated in the year of -27.9%”, said Macedo.

For economist Rafael Cagnin, from Iedi (Instituto de Estudos para o Desenvolvimento Industrial), the growth in production in 2021 means a simple “statistical effect” after two years of decline.

He underlines that the sector was already in difficulties before the pandemic. According to the IBGE, industrial production has fallen in six of the last ten years in the country.

“The 3.9% growth has to be analyzed in this context”, says Cagnin.

“The reaction involves the resumption of reforms and the awareness that, in addition to seeing the problems of the past, the country also needs to look to the future and the technological transformations of the world”, he adds.

bottlenecks

The shortage of inputs is still identified as a problem that affects part of the factories. The lack of components is associated with the pandemic, which has misaligned global production chains. Vehicle manufacturers, for example, came to paralyze production lines due to the frame.

The lack of inputs has been accompanied by rising prices. In 2021, the inflation of goods used by the industry accumulated a high of 28.39%, according to the IPP (Producer Price Index).

The advance was the largest ever recorded in the historical series, which began in 2014. The IPP, another IBGE indicator, measures the variation in prices at the entrance of factories, without the effect of taxes and freight.

Analysts consider that escalating inflation for Brazilian consumers and falling labor incomes also represent an obstacle to industrial recovery. Together, the two factors make it difficult for families to purchase goods.

“There are reflexes of the pandemic on the production process, such as higher production costs and lack of raw materials, and also, on the domestic demand side, inflation at higher levels and the job market that, although it has shown some degree of recovery, is still very much characterized by the precariousness of employment conditions, with lower wages”, pointed out Macedo.

In comparison with November, the 2.9% expansion of the general industry was driven by the production of motor vehicles, trailers and bodies. The segment rose 12.2% in December. It was the fourth consecutive month of growth — a period with a cumulative gain of 17.4%.

Another contribution in December came from the activity of food products, which rose 2.9%. The advance is mainly due to the production of sugar and the return of beef exports to China, says the IBGE.

In Macedo’s assessment, it is still premature to assess whether or not the monthly increase represents the beginning of a reversal of losses in industrial production.

According to economist João Leal, from Rio Bravo Investimentos, after the release of December data on the factories, it is possible to project GDP (Gross Domestic Product) with an increase of 0.2% to 0.3% in the fourth quarter of 2021. The estimate The current price of the house, which should be reviewed in the coming days, has a smaller variation of 0.1%.

However, Leal says the scenario for the industry and the economy as a whole remains complicated.

“The beginning of 2022 should have supply problems, with a lockdown in China and the closing of some ports. In addition, there are still the effects on demand, with high inflation and a recovery in the labor market marked by lower wages”, he analyzes.

Risks in 2022

In the view of economists, industrial production tends to walk sideways this year, with growth a little above zero in the accumulated until December.

The uncertainty of the election period, the risk of new variants of the coronavirus, which can impact the production of inputs in the world, and the inflationary pressure are among the main threats of 2022, points out Rafael Cagnin, from Iedi.

“The scenario is not very favorable. We should have a stagnant GDP, with high inflation, fragile income and high interest rates. This compromises the performance of the industry.”

João Leal, from Rio Bravo, has a similar assessment. “We will have the effect of still high inflation and the impact of interest. So, the scenario is not positive”, he concludes.

Most industrial activities are still below pre-pandemic levels in the country. In December 2021, 16 of the 26 surveyed were operating at a lower level than in February 2020.

The furthest from pre-crisis is maintenance, repair and installation of machinery and equipment. Activity was 24.9% below pre-pandemic. Next, furniture and clothing items appear, 17.8% and 16.9% apart from February 2020.

The extractive industry is the only one that is at the same level as the pre-pandemic. The other nine activities analyzed are above. In this case, the highlight goes to the production of machinery and equipment, which operated, in December, 16.5% above the pre-crisis level.

According to André Macedo, from the IBGE, the sale of goods aimed at the agricultural sector led to a positive result in the segment. There was also a stimulus for the production of equipment for civil construction, said the analyst.