Industrial sector is first affected by coronavirus

The coronavirus has been spreading around the world and since January we have been monitoring its evolution more closely. In Brazil, the first case was recorded at the end of February, and the following month industry began to feel the effects of the pandemic. Research based on business and consumer surveys conducted by the FGV´s Brazilian Institute of Economics (FGV IBRE) shows that in March 2020, almost half of manufacturing companies (43%) had already perceived effects on business, followed by retail (35.4%) and services (30.2%).

Within manufacturing, the segments most affected by the pandemic in March were Oil and Biofuels (88.3%) and Chemicals (61.4%). The study found that 90.5% and 80.2% of companies in these segments expect to be affected in the next few months, respectively. According to nearly all oil companies (90.7%), the main impact is reduced external demand, while for 83.1% of chemical makers it is disruptions in the supply of imported inputs.

“The coronavirus’ effects on the economy started to be felt in March, but they certainly became stronger after the public authorities imposed restrictive measures. We do not yet know what the full impact on the economy will be, as the situation is affecting all sectors, segments and consumers. The results will depend on the time it takes to resume normal activities,” said Viviane Seda, FGV IBRE’s survey and research coordinator.

More than 50% of companies in 15 of 19 segments said they expect to be affected by the coronavirus in the coming months. The segments that expect to be most affected are Machines and Electrical Materials (91.5%), Cleaning Products and Perfumes (90.2%), Information Technology and Electronics (89.4%), Leather and Footwear (85.9%), Automobiles (82.7%) and Metallurgy (82%).

Most business people’s number one concern is the supply of imported inputs. When it comes to this subject, producers of durable consumer goods are the most worried (86.6%). The issue of stoppages due to health problems was mentioned by 23.0% of companies, and the highest rate was seen among makers of non-durable consumer goods (34.6%).

Interestingly, clothing companies are the least worried. Just 26% of them expect their activities to be affected. This figure is lower than the result among executives at companies that make products that are considered essential, such as food and medicines: more than 40% of them expect to be harmed by the coronavirus.

The study was carried out between March 1 and 25, mainly before schools and stores were closed. It found that even before these restrictions, more than 30% of companies across all sectors were feeling the effects of the pandemic. Furthermore, nearly all (81.4%) of the 1,700 consumers consulted between March 1 and 19 predicted that the coronavirus would seriously or moderately damage the economy.

The complete study is available here.

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