Employment in Machinery and Equipment is Low Despite Higher Production

CEIC Brazil Data Talk - January 3, 2014: Brazil’s machinery and equipment (M&E) production has seen some improvement of late; its sector-specific industrial production index (IPI) has grown for seven consecutive periods since April 2013, after prolonged stagnation (indeed, deterioration) of the sector since early 2011. While agricultural, commercial and industrial M&E production saw hints of recovery during the first quarter of 2013, M&E production as a whole only increased in earnest after April 2013, as mineral extraction and construction M&E production started picking up. Machinery and equipment sector accounts for a significant proportion of overall industrial production in Brazil, comprising a 7.08% share as of 2012 compared to 7.15% during 2010-2011. Beyond its weighting in the IPI, the performance of the machinery and equipment sector helps to provide some understanding of local industries' propensity to make long term capital expenditures (after accounting for imports of M&E). The M&E component of the IPI has been generally highly correlated with that of the overall IPI – especially on a seasonally adjusted basis. The overall IPI began to demonstrate sporadic spurts of recovery as of April 2013, albeit less convincing than the recovery in the M&E sector. However, notwithstanding the strong growth in Brazil’s M&E IPI, the same cannot be said of its associated labour market statistics. Growth in machinery & equipment employment, which weakened considerably during late 2010 and diminished further during 2011 and 2012. It has subsequently contracted for eleven consecutive months from December 2012 and decreased by 3.45% year-on-year during October 2013. The number of hours paid index also declined for the sector, deteriorating from mid-2012. While real wages continued to see growth (except for sporadic declines), this fell below 3.6% over the same period, substantially weaker than the real wage growth in excess of 7% during mid-2010 to the end of 2012. While weak employment in the sector contrasts with growing production levels, employment in the M&E sector has largely mirrored the aggregate employment index, which has declined since late-2011. This suggests a hesitance to take on more staff, amid uncertainty over the long term prospects of the M&E sector in spite of the heightened production. Slow improvements in M&E employment are exacerbated by the seasonal decline in employment statistics, further depressing the index; employment tends to dip towards the end of the year as companies terminate temporary worker contracts each December after the spike in seasonal demand. By Bruno Vasconcelos Google+ Author Profile - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
3rd January 2014 Employment in Machinery and Equipment is Low Despite Higher Production