Industrial production drops in January after December spurt

Brazilian industrial production performance fell below market expectations in January, falling 2.4 percent compared to one month prior, eliminating a considerable portion of the 2.9-percent growth recorded in December 2021, according to data released by the Brazilian Institute of Geography and Statistics (IBGE) this Wednesday. 

Brazil’s industrial production is now 3.5 percent below the pre-pandemic level of February 2020 and 19.8 percent below the record reached by the sector in May 2011. In addition, compared to January 2021, the drop was 7.2 percent.

“The industry has been affected by the disarticulation of production chains due to the pandemic, with the increase in production costs and the difficulty in obtaining inputs and raw materials for the production of the final goods, important characteristics of this process. 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,” writes André Macedo, responsible for the survey.  

To try boosting domestic industry and pushing down prices for the final consumer, the government slashed taxes on manufactured goods by up to 25 percent. Experts, however, are skeptical about the measure, claiming that, as of now, the only certain knock-on effect of the move will be that local governments will be deprived of BRL 9.4 billion (USD 1.8 billion) in 2022.  

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