Brasília, April 29, 2004 (Agência Brasil) - Brazilian industrialists are beginning to recover their optimism. The Conjunctural Survey of the Manufacturing Industry, conducted by the Getúlio Vargas Foundation (FGV) with 1,005 firms from 25 states in Brazil, indicates that 56% of the industrialists are betting on an increase in global demand in the second quarter of 2004. This percentage, which is influenced by big expectations for transactions on the foreign market, is the highest since April, 1991. According to the survey, 35% of the entrepreneurs plan to hire more personnel, while only 11% think they will have to make cuts. The 24% positive difference between the two is the best since October, 1986.
The study indicates that the intention to expand jobs is greatest in the sectors of food (59% of the firms), chemicals (54%), mechanical products (46%), electrical and communications materials (45%), and transportation goods (39%). In general, 53% of the industries foresee an increase in production, as against 15% that anticipate a decline. In the first quarter only 38% believed that production would grow, while 33% expected a reduction.
According to the survey, 26% of the respondents consider the situation of their business good, while 19% think it is weak. The difference, 7%, is the best since April, 2001. The index of capacity utilization (82%) also represents the best result since this date. The sector with the highest rate of capacity utilization is that of intermediate goods (87.2%). The lowest rate is found in the consumer goods sector (75.5%). The largest increase, however, in relation to the first quarter of the year, occurred in the capital goods sector (which produces machinery and equipment for the manufacturing industry), in which capacity utilization rose from 75.1% to 79.8%.
With regard to current demand, 18% consider it strong, 70%, normal, and 12%, weak. This result is ascribed to the rise in foreign orders. Exports should continue to grow, in the opinion of 57% of the industrialists. Only 7% think that foreign sales will recede. Once again, the difference (50%) is the best in the survey's historical series.
PRICE INCREASES
The bad news is that 40% of the industrialists predict an increase in prices, a hike determined basically by trends in the prices of metals and other industrial commodities whose quotations are set by international markets. The strongest pressure appears in the sector of mechanical products.
In the first quarter only 24% expressed the intention of raising prices. In the second quarter, this intention grew to 54%. Another significant increase in intentions occurs in the sector of pharmaceutical products. In the first quarter, 38% of the industrialists in this sector planned to raise prices. For the second quarter, the index is 60%.
On the other hand, some sectors declined in the intention to raise prices. In the first quarter, 73% of textile industrialists forsaw increases. The index is now 24%. Another significant decline occurred in the sector of electrical and communications materials, in which expectations for price increases dropped from 45% to 17%.
According to the survey, final consumers need not worry yet about intentions to raise industrial prices. According to the economist Aloísio Campelo, coordinator of research at the FGV, the result indicates pressure on industrial prices at the wholesale level. He believes that there is little chance that the readjustments will affect retail prices.
Translator: David Silberstein
