Brazil’s Industry Maintains Slow Recovery Rate, Says CNI Survey

RIO DE JANEIRO, BRAZIL – Entrepreneurs in the sector are now perceiving a slight improvement in consumption and in the financial situation of companies.

In addition, employment rose 0.4 points in September compared to August, according to the Industrial Survey, released yesterday, October 22nd, by the CNI.

According to the survey, the production indicator stood at 48.8 points and employment reached 49 points in September. The indicators range from zero to 100 points. When above 50, they indicate an increase in production and employment,

According to the CNI, the capacity utilization indicator remained stable at 69 percent and the actual inventory level dropped to 51.4 points, showing that the sector’s excess inventory has been reduced.

“Employment and the level of desired inventory in relation to the average have improved. These are signs that improvement in the labor market has reflected in domestic demand, with an impact on industrial activity,” the survey shows.

However, the CNI alerts that the current indicators are still far from those observed prior to the recession.

“This situation emphasizes the need to continue structural reform efforts and improve the business environment, in order to overcome the obstacles that limit the current pace of expansion,” the survey states.

Main problems

The number of references to the lack of domestic demand decreased from 41.1 percent in the second quarter to 34.6 percent in the third quarter.

Even with the 6.5 percentage point drop, insufficient domestic demand continues to be the second main problem faced by Brazilian industries, second only to the high tax burden, which accounted for 44.7 percent of referrals in the third quarter.

In third place in the ranking of main obstacles is the lack of working capital, with 18.2 percent of mentions. The lack or high cost of raw materials ranked fourth, with 17.6 percent of submissions, and unfair competition, with 17.3 percent of submissions, is fifth on the list.

Financial situation

According to the CNI, the financial situation of companies improved in the third quarter.

The profit satisfaction index rose 2.2 points in relation to the previous quarter and stood at 42.3 points in the third quarter. The satisfaction index with the financial situation increased by 1.5 points and reached 47.2 points in the third quarter.

Nevertheless, both indicators remain below the 50-point dividing line. Entrepreneurs also note improved access to credit. The index of ease of access to credit rose 0.8 points compared to the second quarter and stood at 40.4 points in the third quarter.

Expectations

The survey also shows that entrepreneurs remain optimistic. All expectations indicators remain above 50 points, showing that the sector expects an increase in demand, the purchase of raw materials, the number of employees and exports over the next six months.

This has enhanced the willingness to invest, reported the CNI. The index of investment intention rose to 54.1 points this month. The indicator is 3.2 points higher than that recorded in October 2018 and is 4.8 points above the historical average.

The investment intention index varies from zero to one hundred points. The higher the index, the greater the willingness of companies to invest.

This edition of the Industrial Survey was conducted from October 1st to 11th with 1,962 companies. Of these, 803 are small, 689 are medium and 470 are large-scale.

Source: Agência Brasil