2024-11-08 14:08:00
After a long hiatus, with a drop in industrial production in seven of the last ten years, Brazilian industry has been showing strength and this year should have a positive performance. In the twelve months ended in August, the index registered an increase of 2.4%, which led the Federation of Industries of the State of São Paulo (Fiesp) revising year-to-date projections upwards. Now, the estimate is that industrial production will close 2024 with an increase of 2.9%, against the 2.2% previously forecast.
August data from the Industrial Survey survey of National Confederation of Industry (CNI) indicate that, for the second consecutive month, there was an increase in industrial activity, with production and the number of employees reacting to an increase in demand for industrial goods. Medium and large companies drove this growth.
“The industry has had a strong performance, displaying robust indicators”, says José Maurício Caldeira, shareholder partner at Asperbras Brasil, a group that operates in different segments of the industrial and agribusiness sector. “This is very important because it is a sector that radiates growth throughout the economy.”
Another CNI indicator, the Industrial Business Confidence Index, also reflects optimism. In September, 26 of the 29 industrial sectors showed confidence. This is the highest number of confident industry sectors in almost two years. The CNI’s understanding is that this positive result is due to the improvement in businesspeople’s perception of the economy’s situation.
“The job market is hot, family income is rising and credit is expanding. This combination of factors are important points to drive the growth of the industry”, believes José Maurício Caldeira, remembering that the unemployment rate reached 6.6% in Augustthe lowest level in history for the month, according to the Brazilian Institute of Geography and Statistics (IBGE).
Since the result of the Gross Domestic Product (GDP) in the second quarter, which increased 1.4% compared to the first quarterthe strength of the industry became clear. The manufacturing industry grew 1.8%, intensifying the recovery observed in the previous quarter (+0.9%). With this result, the increase in the first half of 2024 reached 1.9% compared to the second half of 2023. The highlights are the capital goods and consumer goods sectors.
The increase in credit and business confidence has benefited the capital goods sector. The consumer goods sector was driven by the increase in income and credit. White goods, such as microwaves and stoves, most affected by credit, are recovering.
The prospect of interest rate increases makes the future scenario more uncertain. In September, the monetary authority increased the rate by 0.25 pp to 10.75% per year, arguing that the economy is very heated, which could result in an increase in inflation.
According to the Focus Bulletin released by the Central Bankwhich weekly collects estimates from more than one hundred financial market analysts, the expectation is that interest rates will end in 2024 at 11.74% per year.
“This means pulling the handbrake on the economy. And industry is the segment that feels the most, as it is very sensitive to high interest rates, since industrial goods, such as cars, refrigerators, television, fundamentally depend on abundant and accessible credit”, observes José Maurício Caldeira. “We need to be careful not to harm the sector that is finally starting to have good results”, concludes Caldeira.
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**Interview with José Maurício Caldeira, Shareholder Partner at Asperbras Brasil**
**Editor:** Thank you for joining us today, José. After several challenging years, it seems Brazilian industry is finally on the upswing. What do you attribute this turnaround to?
**Caldeira:** Thank you for having me. The revival of Brazilian industry can largely be attributed to a combination of factors. Firstly, there has been an increase in demand for industrial goods, particularly from medium and large companies. Strong performance indicators, as highlighted in the recent reports, reinforce this growth.
**Editor:** We’ve seen a notable increase in industrial production, with projections for 2024 now set at a 2.9% increase. How significant is this improvement for the overall economy?
**Caldeira:** This is a very significant development. The industrial sector is crucial for economic growth as it creates jobs, supports supply chains, and stimulates consumer spending. An increase in industrial production not only improves business confidence but also enhances family income, which in turn boosts demand for various goods and services.
**Editor:** The recent data from the National Confederation of Industry indicates a rise in industrial activity and business confidence. What does this suggest about the economic climate in Brazil currently?
**Caldeira:** The increase in both industrial activity and business confidence is a clear indication that entrepreneurs are feeling more optimistic about the future. When you have 26 out of 29 sectors showing confidence—this is the highest we’ve seen in nearly two years—it reflects a broader sense that the economic foundations are stabilizing and strengthening.
**Editor:** You mentioned the importance of job creation and rising family incomes. How do these factors interlink with industrial growth?
**Caldeira:** Absolutely. A hot job market, coupled with a low unemployment rate of 6.6%, means more families have disposable income. As credit expands, consumers are more willing to invest in goods, especially durable ones like white goods. This, in turn, boosts production levels in the industrial sector, helping it to sustain growth.
**Editor:** Looking ahead, what challenges do you foresee for Brazilian industries as they continue this recovery?
**Caldeira:** While there is optimism, challenges such as global economic uncertainties and potential supply chain disruptions could pose risks. Additionally, industries must adapt to changing consumer behaviors and technological advancements. However, if we remain focused and continue to innovate while maintaining strong demand, I believe we can navigate these challenges successfully.
**Editor:** Thank you, José, for your insights on the current industrial landscape in Brazil. It’s an exciting time for the sector!
**Caldeira:** Thank you for having me. I’m optimistic about the future and the role the industry will play in Brazil’s economic revival.
