Drop in Industrial Productivity in 2024: Impacts and Future Perspectives

Industrial productivity falls 1,3% in the 1st quarter of 2024, interrupting the upward cycle. Increased hours worked, new jobs and training time are factors.

A productivity in industry recorded a 1,3% drop in the first quarter of 2024, marking the end of a continuous growth cycle. This decline contrasts with previous quarters that showed an upward trend in the industrial sector.

Among the factors that influenced this drop are the increase in worked hours, the creation of new jobs and the time spent on training. These elements, however, failed to improve the efficiency production, which resulted in a reduction in sector productivity. Despite the new hires, performance did not keep up with the pace necessary to maintain growth.

Drop in Productivity and Possible Explanations

New jobs e training time of new workers could be the reason for the drop in productivity. According to data from the National Confederation of Industry (CNI), labor productivity in the manufacturing industry fell 1,3% in the first quarter of 2024, when compared to the last quarter of 2023. This drop interrupts the upward trend observed in the survey ' Productivity in Industry' last year.

The decrease was due to a 1% increase in production, which was accompanied by a greater increase in worked hours, which rose 2,3%. Despite this negative result, it is still uncertain whether this decline will consolidate itself as a new trend.

Productivity Analysis by Different Metrics

'When we measure productivity by the number of workers, we notice stability. However, when analyzing the hours worked, we observed a drop. This can be explained, in part, by the creation of new jobs and the period necessary for training and adaptation of this workforce,' explains Samantha Cunha, Industrial Policy manager at CNI. This adaptation period is crucial for the new workforce to reach an optimal level of income and performance.

Demand for Manufactured Goods and National Production

The survey also indicates that demand for manufactured goods has been growing steadily over the last five months, registering an increase of 5,2% in March, compared to October of the previous year. However, this demand is mostly being met by imported goods, since national production increased by only 1,9% in the same period.

'There is significant room for growth in national industry. The expectation is that productivity will recover, following the accommodation of hours worked and a faster increase in production,' emphasizes Samantha Cunha.

Productivity Throughout 2023

In 2023, labor productivity in the manufacturing industry decreased by 0,5% compared to the previous year. This was the fourth consecutive year of decline in the indicator, accumulating a decrease of 8,5% since 2019, the last year in which productivity growth was recorded.

The loss in productivity was a consequence of a 1% decline in production, along with a smaller reduction in hours worked of 0,5%. In quarterly comparisons, there was an improvement in three of the four quarters, which resulted in a slowdown in the pace of decline, in contrast to the results of 2021 and 2022.

Challenges of the Manufacturing Industry in 2023

Low demand for manufactured goods, which fell 1,7% in 2023, was a significant challenge for the industry throughout the year. This problem has been one of the most cited by industrial entrepreneurs since the fourth quarter of 2022, affecting around 30% of companies.

In the last decade, productivity accumulated a drop of 1,2%. This result is due to a 16,5% reduction in hours worked and a greater drop in the volume produced, of 17,4%.

In the first half of the decade, until 2018, there was an accumulated growth of 7,1% in productivity. However, this gain was neutralized by the 7,8% drop observed in the second half of the decade. Low demand and high interest rates were obstacles to increased investment.

Investment as a Path to Recovery

For CNI, the resumption of investments is essential for productivity to follow a path of faster and more sustainable growth. Investments are essential to boost industry efficiency and performance.

The publication 'Productivity in Industry' monitors the evolution of the competitiveness of Brazilian industry in relation to the main trading partners, focusing on the labor productivity indicator, which is a crucial determinant of competitiveness. Each quarter, the analysis presents productivity indicators in Brazilian industry and, annually, it also includes productivity indicators in the industries of Brazil's main trading partners.

Source: CNI Press