Despite growth, Brazilian industry still below pre-pandemic levels

brazilian industry pandemic
Photo: Angela Macario/Shutterstock

One day after better-than-expected Q2 GDP results, which showed a 2.2-percent growth rate for the Brazilian industry during the last quarter, national statistics bureau IBGE disclosed 0.6-percent growth in manufacturing in July, offsetting the 0.3-percent skid from the previous month.

André Macedo, who oversaw the reading, points out that the industrial sector has been showing a greater frequency of positive results throughout 2022, with five good results in seven months. 

“In these results we can see the influence of government stimulus measures, which help to explain the improvement registered in the rhythm of production. However, it is worth noting that even so, industrial production has not recovered the losses of the past,” he added. 

Industry production is still below the pre-pandemic level of February 2020. In addition, the sector is negative both year-to-date and in the 12-month period, with 2 and 3-percent reductions, respectively. July’s result also shows that while ten industrial sectors experienced a bump, another 16 suffered drops. 

The main driver for the sector was food, with 4.3-percent growth in July and strong performances in sugar, meats, and dairy products. Other positive contributions came from oil products and biofuels (2.0%) and mining and quarrying industries (2.1%). 

On the opposite end of the scale, machinery and equipment (-10.4%), chemical products (-9.0%), and vehicles (-5.7%) were the worst performing sectors.

According to Mr. Macedo, the negative results of industrial categories are not only due to restrictions on the supply of inputs and electronic components for the production of final products, a byproduct of the war in Ukraine and Covid restrictions in China.

High interest and inflation rates have increased credit costs, reduced household disposable income, and kept default rates high, hampering consumption and reducing demand. In addition, “even with the reduction in unemployment rates in recent months, there is still a large contingent of workers outside this labor market and a worsening in the employment conditions being generated,” added Mr. Macedo.