The war in Ukraine and the lockdowns in China’s industrial regions are prolonging a problem that began with the COVID-19 pandemic in 2020: shortages in supplies and hikes in their prices. The issues affect 22 of 25 industrial sectors, as per a survey by the National Confederation of Industry (CNI).
For eight quarters in a row, the industry is reported to have mentioned the difficult access to raw materials as the main drawback. In the second quarter of this year, the most affected sector was printing and reproduction, with 71.7 percent of the companies citing the issue. Next come the cleaning, perfumery, and personal hygiene sectors (70%) and motor vehicles (69.8%).
Only under three segments were the lack of raw materials or their high prices not mentioned as the top concern. For leather and leather goods, the problem appeared in third place, cited by 37.2 percent of the companies interviewed. In furniture (38.7%) and maintenance and repair (45.5%), the problem ranked second on the list.
According to CNI economist Paula Verlangeiro, about half of the industrial production is consumed as supply by the industry itself. Thus, the shortage and high prices of supplies do not affect only the manufacturers but rather the entire production chain, reaching consumers after price hikes and output shortfalls.
The bottlenecks in the logistics and production chain brought about by the pandemic, which had persisted since the end of 2020, were aggravated this year by the war between Russia and Ukraine and the strict lockdowns in China, the economist argued. These last two factors delayed the normalization of global supply chains, which had not yet recovered from the pandemic.
The study also reveals that business people believe the situation should not return to normal until 2023. “Given the present landscape, the main consequences are difficulties in recovering—or maintaining—production, the increase in supply prices and costs in the production chains, in addition to readjustments in the price of consumer goods and greater pressure on inflation,” the CNI economist added.
In addition to the bottlenecks in the access to raw materials, the figures also revealed that the high interest is a major concern for the Brazilian industry. Sixteen out of the 25 sectors examined label the recent increases in the Selic—Brazil’s benchmark interest rate—as one of the five main economic obstacles.
To hold down inflation, the Central Bank has raised the Selic rate from two percent a year in August 2020 to 13.25 percent. The move was regarded as excessive and harmful to production, consumption, and employment, as it makes credit more expensive.
The concern with interest has been reported on the rise for five consecutive half-year periods, and has been mentioned by industrial entrepreneurs more and more often. In a sector-based division, diverse products and automotive vehicles have the Selic as the second biggest problem today. In food, wood, machinery and equipment, electrical materials, metallurgy, textiles, and clothing and accessories, the rate ranks third.
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