Brazilian industrial production lost steam again and fell by 2.4% in January, compared to December. It is the biggest drop for the month since 2018 (-2.6%), informed this Wednesday (9) the IBGE (Brazilian Institute of Geography and Statistics).
As a result, production eliminated part of the 2.9% advance that had been registered in December. Thus, the indicator was further away from the pre-pandemic.
It is 3.5% below the level of February 2020, before the health crisis. It is also at a level 19.8% lower than the record of the historical series, of May 2011.
January’s performance came worse than financial market expectations. Analysts consulted by the Bloomberg agency projected a retraction of 1.9%.
In comparison with January 2021, industrial production fell by 7.2%, according to the IBGE. In this cut, analysts also estimated a smaller retreat, of 6.3%.
The contraction of 2.4%, compared to December, had a widespread profile. According to the IBGE, 20 of the 26 industrial activities surveyed showed a drop in production.
“The industry has been affected by the disarticulation of production chains due to the pandemic, with the increase in costs and the difficulty in obtaining inputs that are important characteristics of this process”, said André Macedo, manager of the IBGE research.
“In addition, rising interest rates and inflation, together with a still high number of workers outside the labor market, help to explain the negative behavior of the industry,” he added.
Among the activities, the most important falls in January were registered by automotive vehicles, trailers and bodies (-17.4%) and mining and quarrying (-5.2%).
These segments had accumulated expansions of 18.2% and 6%, respectively, in the last two months of 2021.
“The segment of motor vehicles is an important example of disarticulation of the productive chain, since it has difficulties in obtaining important inputs for the production of the final good”, said Macedo.
“The extractive sector, in January 2022, had the extraction of iron ore greatly affected by the rains in Minas Gerais”, he added.
According to the researcher, the 2.9% rise in the industry in December may have reflected the anticipation of production, as January is a month marked by collective vacations and stoppages.
“Even in the accumulated indicator of the last 12 months, in which the industry continues to grow, with an expansion of 3.1%, the advances lose more and more intensity. In August 2021, the rate reached 7.2%” , commented.
impact of war
From February onwards, the macroeconomic scenario became more concerned with the war between Russia and Ukraine. The tension related to the conflict in Eastern Europe made the prices of agricultural commodities and oil soar in the international market.
The situation, according to analysts, can affect both input prices and logistics costs in the industrial sector, already impacted by the pandemic.
“It is clear that this conflict could have even more consequences on global production chains, affecting domestic production,” said Macedo.
“How this will happen, and in what magnitude, we have to wait for the course of the year. This movement brings negative reflexes”, he amended.
Russian President Vladimir Putin has already reacted to the US embargo on his country’s oil and natural gas, announcing that he will ban or limit trade in Russian raw materials by the end of this year.
“The conflict between Russia and Ukraine tends to delay the reorganization of global production chains, bringing an additional negative component to the sector’s recovery,” said economist Claudia Moreno, from C6 Bank.
According to the analyst, the January result of industrial production should not impact, for now, the economic growth projections made by the bank for 2022.
However, the sector should continue to contribute negatively to the result of the Brazilian GDP (Gross Domestic Product) this year, ponders Claudia. C6 Bank forecasts GDP growth of 0.5%.
André Perfeito, chief economist at Necton Investimentos, also believes that, after the war, there are more challenges for industrial recovery. In his view, the fall in Brazilian production in January “is a bad sign for the beginning of the year”.
higher interest
Even with the reopening of the economy, after greater restrictions to stop Covid-19, the industry began to show signs of fragility in the country in recent months.
The scarcity of inputs is pointed out as a problem that still affects part of the factories. The lack of components is associated with the effects of the pandemic, which has misaligned global production chains. The automotive sector is among the most shaken.
The production of light and heavy vehicles closed the first two months in Brazil with 311,400 units produced, a drop of 21.7% compared to the same period in 2021, indicated on Tuesday (8) the Anfavea (association of automakers).
The result reflected a combination of factors: the effect of the ômicron variant on production lines, the collective holidays in January, the irregular supply of parts and the slowdown in sales at the beginning of the year.
To complicate the picture for the industry as a whole, the shortage of inputs has been accompanied by rising prices. In January, industrial inflation was 1.18%, according to the IPP (Producer Price Index).
The index is also calculated by the IBGE. In 12 months, the rise in the IPP was 25.51%. The indicator measures the variation in prices at the entrance of the factories, without the effect of taxes and freight.
Another challenge for the sector in 2022 is the increase in interest rates. To try to contain inflation, the BC (Central Bank) has been raising the Selic, which has returned to the double-digit level.
The higher basic interest rate increases the cost of borrowing in the country, which makes it difficult for productive sectors to invest.
“The dynamics of high inflation with high interest rates will be harmful to the industry”, projects Camila Abdelmalack, chief economist at Veedha Investimentos.
“The outlook for the year was already very delicate, and now it has been worsened by the situation in Eastern Europe. The conflict between Russia and Ukraine raises concerns about the inflationary scenario.”
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