Brazil’S Industrial Capacity Nears Limits As Economy Heats Up

(MENAFN- The Rio Times) (Analysis) Brazil's economy is experiencing a surge in growth, but this prosperity comes with potential risks. The country's industrial sector is operating at near-capability levels, raising concerns about inflation and sustainable economic expansion.

In September 2024, Brazil's manufacturing industry reached a utilization rate of 83.4%. This figure matches the peak seen in July and represents the highest level since May 2011.

The data comes from a survey conducted by the Getulio Vargas Foundation (FGV). Several sectors are feeling the pressure of increased demand.

Food, clothing, pulp and paper, oil derivatives, metallurgy, and textiles are operating at particularly high capacities. These industries are also reporting low inventory levels, indicating strong consumer demand.

The surge in industrial activity is largely attributed to increased employment and income levels in Brazil. In August 2024, the country reached a record 102.517 million employed individuals.



The total wage mass in circulation hit R$326.205 billion ($65.24 billion), an 8.3% increase from the previous year. Analysts point to the government's policy of raising the minimum wage above inflation as a key factor.

The early payment of court-ordered debts also injected more money into the economy, boosting consumption. As a result, Brazilians are buying more food, beverages, and clothing.
Economic Growth in Brazil
The food industr is experiencing particularly strong growth. Nauterra, a leading canned fish producer, has been operating at up to 90% capacity in recent months.

From January to July, their sardine production increased by 20% compared to the previous year. The clothing industry is facing even greater pressure.

In September, clothing factories were operating at 96% capacity, with textile manufacturers at 83.6%. Both sectors reported very low inventory levels.

However, the Brazilian Textile and Apparel Industry Association (Abit ) presents a slightly different picture. Their data shows confectionery capacity utilization at 84.4% in July, up from 77.3% the previous year.

Weaving capacity utilization actually decreased from 81.2% to 79.3%. The cardboard packaging sector, often seen as an economic indicator, is also booming.

August saw a record 376,204 tons of corrugated cardboard boxes shipped, a 2.13% increase from the previous year. The industry has revised its growth projections for 2024 from 2% to 5.2%.

While some sectors are thriving, others are experiencing slower growth or even stagnation. Industries such as plastics, machinery, and equipment, and automotive are neither overstocked nor at capacity.

In addition, some sectors like leather and footwear, chemicals, and electronics, are operating below capacity and have excess inventory.

The future trajectory of this economic boom remains uncertain. Much will depend on how the economy responds to the recent interest rate hikes implemented by Brazil's Central Bank.

As the country navigates this period of growth, balancing expansion with inflation control will be crucial for long-term economic stability.

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