Despite dropping in June, Brazilian Industry Confidence quarterly results still above Q1 2018

The Industry Confidence Index (ICI), calculated by the Brazilian Institute of Economics (FGV IBRE), dropped 1.0 point in June 2018, down to 100.1 points – the lowest since January this year (99.4 points). Nevertheless, the ICI ends the second quarter (100.7 points) 0.2 point above the result of the first quarter (100.5 points). “The interruption in road transports between late May and early June increased finished product inventories and reduced the input stocks, which ultimately affected costs, production, capacity usage and confidence. Although the June survey also brings the good news of better expectations, this may be a temporary effect, influenced by the base effect of the sector’s underperformance in May”, said Tabi Thuler Santos, Coordinator of IBRE’s Industry Survey. Confidence dropped in 12 of 19 the industries surveyed in June. The Current Situation Index (ISA) fell 5.5 points, down to 95.1 points – the lowest since September 2017 (90.8). The Expectations index (IE), in turn, rose 3.4 points, up to 105.0 points – the highest since May 2013 (105.4). The significant worsening of inventory levels was a key factor driving lower confidence this month. The percentage of companies with excessive stocks increased from 7.9% to 12.8% between May and June – the worst result since April 2017 (12.9%). The ratio of companies with insufficient stocks rose from 3.9% to 4.5%, returning to the same level of April 2018. Improved hiring and production expectations also influenced the IE’s increase in June. The employed staff evolution indicator for the next three months rose 6.2 points, up to 107.3 points – the highest level since June 2011 (108.8); and the expected production indicator for the next three months rose 5.8 points, up to 108.0 points – the highest level since May 2013 (108.1). The Industry Installed Capacity Usage Level (NUCI) dropped to 76.2% in June, 0.3 percentage points (p.p.) below the result recorded in May. This is the first time the NUCI dropped since September 2017. In quarterly terms, the NUCI reached 76.4% in the second quarter – up 0.9 p.p. compared to the first quarter this year. The June 2018 edition gathered data from 1,069 companies between June 4 and 26. The next Industry Survey results will be published on July 27, 2018. Preliminary results will be released on July 20. Go to the website to see the complete results.