Industrial production rises 0.7% in February, but remains below pre-pandemic

Industrial production in Brazil increased by 0.7% in February, compared to January, reported this Friday (1st) the IBGE (Brazilian Institute of Geography and Statistics).

The result came a little above financial market expectations. Analysts consulted by the Bloomberg agency projected an increase of 0.5% in the median.

The advance in February eliminated part of the 2.2% drop recorded in the previous month. However, the sector is still below the pre-pandemic level.

Production is at a level 2.6% lower than in February 2020, before restrictions in the health crisis. It also registers a level 18.9% lower than the record of the historical series, of May 2011.

In comparison with February 2021, factory production fell by 4.3%, indicated the IBGE. In this cut, the estimate of market analysts was a retraction of 4.9%. In 12 months, the indicator accumulates a high of 2.8%.

This Friday’s release is the first after the IBGE updated the survey’s seasonal adjustment model. According to the institute, the procedure is standard in surveys of this type.

The advance of industry in February, compared to January, had positive rates disseminated in 16 of the 26 surveyed sectors. Among activities, the most important positive influences came from mining and quarrying (5.3%) and food products (2.4%).

“The extractive sector had an important fall in January (-5.1%), due to the greater volume of rains in Minas Gerais that month, which hampered the extraction of iron ore. With the normalization of rains, there was a regularization production”, said André Macedo, IBGE research manager.

“The food sector had its fourth positive month of growth, accumulating a gain of 14% in the period. In February, the highlights were the production of sugar and meat and poultry, two important groups within the sector”, he added.

According to the IBGE, other positive contributions came from pharmochemical and pharmaceutical products (12.7%), automotive vehicles, trailers and bodies (3.2%), metallurgy (3.3%), beverages (4.1%), other transport equipment (15.1%) and rubber and plastic products (2.9%).

“The month of January is also characterized by having some degree of reduction of working hours and by the greater movement of collective vacations. In February, there is a normal return to work, which boosts the production of the month. This helps to understand the positive result of February at the margin of the series”, evaluated Macedo.

Throughout 2021, industrial production began to show signs of fragility in the country, even with the reopening of the economy.

The shortage of inputs is pointed out as a problem that still affects a portion 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 shortage of inputs was accompanied by rising prices. In February, industrial inflation was 0.56%, according to the IPP (Producer Price Index).

This indicator is also calculated by the IBGE. In 12 months, the rise in the IPP was 20.05%. The index measures the change in prices at the entrance to the factories, without the effect of taxes and freight.

According to economists, another challenge for the industry in 2022 is the increase in interest rates. To try to contain inflation in Brazil, the BC (Central Bank) has been raising the Selic, which reached 11.75% per year — and should rise further.

The double-digit basic interest rate increases the cost of borrowing in the country, which makes investments in productive sectors difficult.

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 skyrocket at first in the international market.

The war, in the view of analysts, threatens both input prices and logistics costs in the industrial sector, already impacted by the pandemic.