Industrial production dropped in June, says survey
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The number of industry employees dropped from 46.8 points in May to 45.2 in June.
Brazil's industrial production dropped last June, remaining at 39.6 points from a previous 48.4 points in May and 46 points in May 2013. This is its lowest level since the time series began in 2010, reports the Industrial Survey released by the National Confederation of Industry (CNI) released Friday (July 18).
Besides the output decline, the survey found other decreases in the number of employees and capacity utilization, and a build-up in inventories. CNI admitted that the World Cup did play a role, but said the worsened figures have also resulted from other factors, and chiefly reflects a worsening of an existing downward trend.
The number of industry employees dropped from 46.8 points in May to 45.2 in June. Capacity utilization reported a milder drop, standing at 68% as against 71% in the previous month and 72% in the previous year. There again, the result was the worst since the beginning of the monthly series.
CNI economist Marcelo Azevedo explained the methodology is focused around a dividing line at 50 points. When such indicators as output and employment depart too far from this level, it reflects a negative scenario.
“What caught our attention was the extent of the decline [in production]. The figure was well below the dividing line, showing a marked decline that started in industry and spread out. And we found a similar trend in the number of employees,” he said. According to him, there is a fear that this scenario could create a global impact. “This industrial slowdown tends to spread into the overall economy via employment,” he said.
According to Renato da Fonseca, CNI Research and Competitiveness manager, “the World Cup did have a [negative] impact on demand [for industrial production], but the industrial performance has been showing signs of decline throughout the year.”
“No one could certainly expect such a sharp decline, otherwise stocks would not be building up. Industry began 2014 with higher expectations. As for June, it's hard to tell the effect of the World Cup from what would have been a natural worsening [in an existing critical industrial scenario].”
Among the main problems faced by the industry in the second quarter, business leaders heard by the survey cited the high tax burden (mentioned by 54.5%), a shortage in demand (40.7%), the fierce market competition (31.3%), the cost of raw materials (25.4%) and the shortage of skilled workers (22.6%).
Despite the poor results, the expectations for increases in demand in the upcoming six months was moderate at 55.2 points, and the expectations for export amounts for the period stood at 49.7 points.
Translated by Mayra Borges
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