After falling by an average of 1.3% last year, In January the sector fell by 6.3% in the interannual comparison, according to the index prepared by the Latin American Foundation for Economic Research (FIEL)
In January, according to the first data provided by the foundation’s economists, industrial production recorded this contraction compared to the previous year with generalized declines in activity which has reached the food and beverage, textile, chemical and plastic, non-metallic minerals, metalworking and automotive industries.
As for the ranking of sectoral growth of the month, paper and pulp production grew by 1.9%, followed by oil refining which increased by 1.1%, in both cases compared to January last year. In turn, cigarette shipments matched the January 2023 level.
But, The remaining branches of industrial activity recorded declines. For example, the production of textile inputs was reduced by 2.2%. This is followed by the production of chemical and plastic inputs, which contracted by 3.1%, and that of food and beverages, which decreased by 4.9%, in any case in an interannual comparison.
According to FIEL, the decline in activity was above average: the base metals industry, which recorded a decline of 8.7%, the production of non-metallic minerals, which contracted by 13%, and automotive manufacturing, down 16.4%, and metalworking. with a reduction of 18.7%, in any case compared to January 2023.
In seasonally adjusted terms, Industrial production for the month fell 0.9% compared to December, “Concatenating two months of decline and resuming the downward path after the impasse recorded in November,” reads the sector report. “With the above, the seasonally adjusted activity level for the month of January is 11.2% less than that recorded in May 2022 at the beginning of the current recessionary phase of the sector”.
Finally, all the indicators that allow us to anticipate a phase reversal indicate that it is deepening and prolonging. Basically, FIEL analysts look at it in terms of short-term prospects, the sector will go through a period of adaptation to the new economic scenario at the beginning of 2024which is characterized by a marked change in the relative prices of goods and services, a strong deterioration in the public’s purchasing power and greater export incentives.
Another point assessed by economists is that “in the short term the renegotiation of trade debts with foreign suppliers through BOPREAL, together with the deadlines established for access to the foreign exchange market, will mark the pace of imports of inputs, parts and piecesand with it the the normalization of inventories in subsidiaries that intensively use imported inputs”.
According to FIEL, the production of consumption-related sectors – for example, textiles, footwear, durable goods of the white, grey, brown line and small household appliances -, will be the most punished. This segment “will be affected by the deterioration of real income and the readjustment of household expenditure. Other goods with less elastic demand could support sales and production, even when this implies migrations towards lower quality goods,” he considered. “But the change in the relative prices of the economy implies incentives for greater exports, so that sectors with international insertion can overcome by a greater margin the impact of the contraction of the domestic market, as in the case of food, chemicals and plastics, base metals, fabricated metals and vehicles.”
When considering medium-term prospects, according to FIEL, “we must not lose sight of Brazil’s economic scenario, which could boost local industrial activity.”
Source: Clarin
