Industry confidence declines in March 2020, already showing effects of coronavirus
Fundação Getulio Vargas’ Industry Confidence Index (ICI) dropped 3.9 points this month, to 97.5. Despite this negative result, the average ICI figure in the first quarter of 2020 (99.9 points) is 2.7 points higher than in the fourth quarter of 2019 (97.2 points).
“This month’s results show the first effects of the coronavirus pandemic on industry confidence. ICI experienced the steepest decline since it plummeted 6.6 points in March 2015, when the first demonstrations against the Dilma Rousseff administration occurred. The Installed Capacity Utilization Level (NUCI) and executives’ perceptions of demand and business prospects suggest that industrial production may have been impacted. Furthermore, the sharp deterioration in expectations, especially regarding durable consumer goods, indicates uncertainty in the coming months,” says Renata de Mello Franco, an economist at the FGV´s Brazilian Institute of Economics (FGV IBRE).
In March, confidence declined in 14 of the 19 surveyed industrial segments. This negative result reflects business people’s worsening perceptions about the current situation, and above all deteriorating expectations for the next three and six months. The Expectations Index fell 5.6 points, to 96.2. Likewise, the Current Situation Index lost 2.1 points, to 98.8.
This month, the biggest impact on the Expectations Index came from executives’ reduction in expectations about production in the next three months. The envisaged production indicator fell 7.5 points, to 92.1 – the lowest since April 2017 (92.0 points). In relation to other indicators, those that measure business trends in the next six months and the level of employment in the next three months fell 6.6 points (to 98.3) and 2.4 points (to 98.6), respectively.
With respect to the present moment, although sector evaluations about the level of stocks have improved (this indicator went from 99.9 to 104.2 points), there was a deterioration in relation to demand and the present business situation. Both indicators worsened, especially the total demand indicator, which dropped 5.8 points to 95.1 – the lowest figure since August 2017 (88.2).
The Installed Capacity Utilization Level (NUCI) dropped 0.9 percentage points, to 75.3%. In terms of quarterly moving averages, NUCI now stands at 75.6%.
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