All industry expectations indices rise in July, points out CNI

There is greater optimism among industrial entrepreneurs with regard to demand, the purchase of raw materials, the number of employees and the quantity of goods exported, for the next six months. The indicator that measures the investment intention increased by 0.1 point, to 54.1. It is above the historical average for the month.

However, the industry’s performance worsened from May to June 2023. The Industrial Survey points out that there was a drop in production and employment in the sector. Inventories were also higher than planned by the companies and the Use of Installed Capacity (UCI) remained stable.

Paula Verlangeiro, Policy and Industry analyst at CNI, comments on the results of the survey. “In June 2023, we observed a deterioration in the performance of the industry. This came through the indicators of production and industrial employment. Both showed a decline. In May, there was a growth in production, but this was reversed in June. And, for industrial employment, this indicator has been on a downward trend for nine months.

Optimism of industrialists is a reflection of a more positive scenario, says economist

Results

According to search, the index that measures industrial production dropped 5.3 points, from 51.6 to 46.3. As it is below the 50-point dividing line, the indicator shows a downward trend in production. The evolution index for the number of employees changed from 48.4 in May to 48.6 in June. Despite the slight rise of 0.2 points, the indicator remains below the division line — which points to the maintenance of the downward cycle.

Another important indicator to understand the performance of the industry, the Use of Installed Capacity (UCI) remained at 69%. The UCI shows what the level of productive activity is at the moment, in relation to its maximum production potential. As of June 2021, the UCI was at 71%. Last year at 72%. That is, this is the lowest level for the month in the last three years.

Inventories remained at the same level: 51.3 points. As it is above the 50-point dividing line, the result shows that storage has grown, which is a reflection of lower consumption.

main problems

The Industrial Survey also listed the main problems faced by the industry in the second quarter of 2023. Insufficient domestic demand was identified as the sector’s biggest challenge between May and June, by 37% of entrepreneurs.

Second, they chose the high tax burden. Throughout the historical series, this problem is usually found in the first positions of the ranking. High interest rates close the list of the three main problems for entrepreneurs. Paula Verlangeiro claims that the industry is stagnant in 2023 – which is reflected in the ranking of the main difficulties.

“The first place went to insufficient domestic demand, which shows the low demand for industrial goods. This is closely linked to the slowdown of the economy, as a whole. High interest rates also registered an increase and it was the biggest increase of the entire series, since 2015. This problem is being felt a lot by entrepreneurs. And this issue affects a series of very important decisions for the entrepreneur, such as investing, buying machinery”, he explains.

Despite this, there is good news, according to the survey. The indicator that measures how satisfied industrialists are with their companies’ operating profit jumped 0.6%. Still, it remains below the dividing line. That is, there is more dissatisfaction than satisfaction.

When the subject is satisfaction with the company’s financial situation, there was an increase of 1.1 points in the respective indicator. The increase was enough for the index to exceed 50 points, which points to satisfaction with the financial situation in the period.

Despite the basic interest rate being at 13.75%, access to credit has improved in the view of industry entrepreneurs. However, the 2.8% increase was not enough to change the difficulty in obtaining credit, in general – say the interviewees.

The price of raw materials, on the other hand, fell by 6.4 points, staying below the 50-point line, which means that one of the major bottlenecks faced by the sector in recent months is no longer critical, points out the study.

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