Record drop in GDP: see the sectors most and least affected by the pandemic | economy

• GDP registers a record fall of 9.7% in the second quarter and Brazil re-enters recession

The steepest falls and with the greatest impact on the result of GDP (Gross Domestic Product) were observed in the service sector and industry. On the demand side, there was a drastic contraction in household consumption and investment.

Although several segments are already showing reaction, analysts heard by the G1 warn of the risk of loss of economic activity in the final stretch of the year, in the middle of the closure or reduction of measures to mitigate the effects of the pandemic and the increase in unemployment, and estimate that GDP (Gross Domestic Product) should only recover the pre-pandemic in 2022.

The main highlights of the GDP result in the second quarter were:

• Services: -9.7% (record drop)
• Industry: -12.3% (record drop)
• Agriculture: + 0.4%
• Processing industry: -17.5%
• Extractive industry: -1.1%
• Civil construction: -5.7%
• Household consumption: -12.5% ​​(record drop)
• Government consumption: -8.8%
• Investments: -15.4%
• Export: + 1.8%
• Import: -13.2%

See below the segments most and least affected by the pandemic within each of the main components of GDP:

The service sector suffers more restrictions

The service sector, which has around 70% of GDP, remains the most affected by the pandemic, as several activities remain restricted or even prohibited to reopen due to health precautions to prevent the spread of the coronavirus.

According to the IBGE monthly series, the sector grew again in June, after 4 consecutive falls, but closed the 2nd quarter with a record drop, with volume still 14.5% below the pre-pandemic level.

Among the most affected activities are those aimed at families or related to leisure and tourism, which require a face-to-face service or greater mobility, schools, hotels, air transport, bars and restaurants, cinemas, beauty salons, domestic services, artistic activities, etc.

“The services segment is expected to recover more slowly compared to other sectors, especially in categories such as family services, which include, for example, accommodation and food outside the home. This segment, in addition to being strongly affected by the Isolation and closure of activities, is still suffering from the pandemic, due to the stricter demand and the definitive closure of businesses ”, says economist Alessandra Ribeiro, of Tendencies.

Among the few exceptions, information technology services and warehousing and postal services managed to register a slight increase in the first half, amid increased demand for online services and delivery.

Supermarkets support retail

Retail trade, which also integrates the service sector, has shown a faster recovery. Even so, it also suffered a record drop in the 2nd quarter.

A The recovery has been basically supported by supermarket sales, which increased 5.4% in the year to June. The segment represents more than half (50.8%) of the total volume of Brazilian retail sales and, as it is considered an essential service, it has been operating with practically no restrictions, even absorbing part of the consumption that previously went to bars and restaurants.

In addition to supermarkets, Pharmaceutical items, furniture and household appliances have also returned to their pre-coronavirus level., with merchants managing to adapt their businesses to online sales.

The biggest drops in the year to June, according to IBGE, were observed in sales of clothing and footwear (-38.9%), books, newspapers, magazines and stationery (-28.7%) and in vehicles, motorcycles. , parts and pieces (-21.8%).

According to an estimate by the National Confederation of Commerce of Goods, Services and Tourism (CNC), more than 135,000 stores, or about 10% of the country’s total, were closed and 500,000 jobs were lost in Brazil between April and June.

In industry, the drop was greater among durable goods

Industrial production posted a record drop in the second quarter, reflecting the intense effects of the pandemic and the closure of several factories.

In the first semester, the greatest decreases were recorded in the production of durable consumer goods (-36.8%) and capital goods (-21.2%), mainly influenced by the reduction in automobile manufacturing (-51 ,4%). %) and household appliances (-13.5%). There was also a strong decrease in clothing and accessories (-36.6%) and leather, travel items and footwear (-33.7%).

The extractive industry and civil construction, on the other hand, had smaller falls. Even so, new property sales fell 16.6% compared to the first quarter. The positive surprise came from real estate credit, which registered a 29% increase in financing with savings resources, driven by cuts in the basic interest rate, currently at 2% per year, a record low.

Despite high idleness and even low business confidence, the industrial sector was the one that generated the most formal jobs in the country in July, after 4 months of increasing layoffs in the country, while the services sector continued to lose jobs.

Agribusiness emerges unscathed from the pandemic

Agribusiness was the exception to the positive performance in the second quarter of the main sectors of the economy, helping to mitigate the intensity of the economic downturn between April and June. Growth was sustained both by the prospect of a record harvest, increased Chinese interest in Brazilian soybeans, and a favorable exchange rate for exporters.

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“Agribusiness has really escaped unscathed. The pandemic did not prevent either harvesting or cargo transportation. And even the agribusiness sector, especially that related to food, suffered very little, both because exports remain firm and strong and because the domestic demand for essential products continues without a fall, ”says Silvia Matos, economist at Ibre / FGV.

Even with little weight in the calculation of GDP, with a share of around 5%, analysts point out that agribusiness represents a segment with an important role in the Brazilian economy, especially if the share of agribusinesses is also taken into account ( such as slaughterhouses) and the service sector of the activity (such as cargo transportation).

Economist Sergio Vale, from MB Associados, explains that agribusiness is experiencing a “record moment of production and income”, which has helped boost the economy of regions with a strong presence in this sector, such as the Midwest.

Consumption has a strong retraction even with emergency help

On the demand side, household consumption, the main driver of Brazilian GDP for years, registered a record drop of 12.5% ​​in the second quarter. And the drop was not even greater because government aid measures, especially Emergency Aid, helped mitigate the impacts of the pandemic.

With an uncertain future, Emergency Aid has prevented more than 30 million people from falling below the poverty line, and has even guaranteed a real increase in the mass of Brazilian income, allowing a certain continuity of consumption, especially of those non-durable, like food.

On the other hand, Datafolha research showed that 46% of Brazilians found a reduction in family income caused by the coronavirus pandemic. And even the population with greater purchasing power has I preferred to save to consume, according to a survey by FGV.

The analysts’ assessment is that renewing public aid to the poorest population, although of lower value, will be essential to avoid a sharp contraction in income in the final stretch of the year and even the risk of a new fall in GDP in the 4th. trimester.

“The challenge in the coming months, therefore, is to guarantee the renewal of the stimuli in sufficient volume to avoid a recessive recession without signaling an emptying of the current tax regulations, which could cause a significant and lasting erosion of the fiscal outlook of the country and the credibility of the country. public debt “, evaluated LCA Consultores in a report.

Concerns about the dynamics and duration of the pandemic and the business cash blow from the health crisis caused investment momentum to collapse in the country, which fell an impressive 15.4% in the second quarter.

According to Ibre / FGV, the fall in the second quarter is the worst performance in at least 25 years of the so-called Gross Fixed Capital Formation (GFCF), a rate that determines everything invested in machinery, durable goods and civil construction.

A The outlook is that the recovery of investments will be slower than that of other components of GDP, due to even greater idleness in factories and backlog, budgetary restrictions for public expenditures and delays in the schedule of concessions for infrastructure projects and privatization..

With so many uncertainties and doubts about the pace of recovery of the Brazilian and world economy, it became more difficult for companies and entrepreneurs to trust the viability of new investments.

“Return on investment is the great key to a sustainable recovery. The question remains: if before the pandemic the economy was already experiencing a drop in productivity, slow investment and a lot of informality, why should it be any different now? that the discussion on our structural problems continues to be urgent ”, says Matos.