Brazilian industry losing steam across the board

Industrial output stalled in December and shrank 0.7 percent across the entirety of 2022. The sector remains more than 2 percent below pre-pandemic levels and almost 19 percent below its May 2011 peak. The 2022 drop hit all four major segments and more than 60 percent of the types of goods surveyed by Brazil’s official statistics agency. Industry leaders don’t believe the outlook will improve soon, with the sector’s confidence levels consistently dropping since September and dipping below 50 points in January 2023.

Multiple industry segments are hurting from Brazil’s monetary tightening process. Since March 2021, the country’s benchmark interest rate has risen from 2 to 13.75 percent. Sectors heavily dependent on credit — such as durable goods sales, down by 3.3 percent in the year — have lost steam in recent months.

“There is also influence from the increase in default and indebtedness rates. And the labor market, which is still characterized by the precariousness of the jobs generated, although it has shown a clear recovery throughout the year,” Mr. Macedo concluded.

In addition, persistent inflation — which only began to ease up for Brazilians in the second half of the year — also harmed the sector. High prices, especially of necessities such as food, hampers household income and, thus, consumption. 

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