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Productivity in Industry Falls 1.3% in Q1 2024, Interrupting Growth Cycle. Increase in Hours Worked, New Jobs, and Training Time Are Factors.
A productivity in industry recorded a decline of 1.3% in the first quarter of 2024, marking the end of a continuous growth cycle. This decline contrasts with previous quarters that showed an upward trajectory in the industrial sector.
Among the factors that influenced this decline are the increase in hours worked, the creation of new jobs, and the time spent on training. However, these elements were not able to improve efficiency in production, which resulted in a reduction of productivity in the sector. Despite new hires, performance did not keep pace with the necessary rhythm to maintain growth.
Decline in Productivity and Possible Explanations
New jobs and training time for new workers may be the reason for the decline 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 compared to the last quarter of 2023. This decline interrupts the upward trend observed in last year’s ‘Productivity in Industry’ survey.
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The decrease occurred due to a 1% increase in production, which was accompanied by a larger increase in hours worked, which rose 2.3%. Despite this negative result, it is still uncertain to claim whether this decline will solidify as a new trend.
Analysis of Productivity by Different Metrics
‘When we measure productivity by the number of workers, we notice stability. However, when we analyze it by hours worked, we observe a decline. This can be partly explained by the creation of new jobs and the necessary period for training and adapting 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 output and performance.
Demand for Manufactured Goods and Domestic Production
The survey also indicates that demand for manufactured goods has been steadily increasing over the last five months, recording a rise of 5.2% in March compared to October of the previous year. However, this demand is being largely met by imported goods, as domestic production increased by only 1.9% in the same period.
‘There is significant room for growth in the domestic industry. The expectation is that productivity will recover, following the adjustment 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 when growth in productivity was recorded.
The loss of productivity was the result of a 1% decline in production, along with a smaller reduction in hours worked of 0.5%. In quarterly comparisons, there was improvement in three of the four quarters, which resulted in a deceleration of the decline, in contrast to the results of 2021 and 2022.
Challenges for the Manufacturing Industry in 2023
The low demand for manufactured goods, which fell by 1.7% in 2023, was a significant challenge for the industry throughout the year. This issue has been one of the most cited by industrial entrepreneurs since the fourth quarter of 2022, affecting about 30% of companies.
In the last decade, productivity has accumulated a decline of 1.2%. This result is due to a reduction of 16.5% in hours worked and a larger decline in the volume produced, of 17.4%.
In the first half of the decade, up to 2018, there was an accumulated growth of 7.1% in productivity. However, this gain was neutralized by the 7.8% decline observed in the second half of the decade. Low demand and high interest rates have been obstacles to increasing investments.
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 crucial for boosting the efficiency and output of the industry.
The publication ‘Productivity in Industry’ monitors the evolution of the competitiveness of the Brazilian industry in relation to its main trading partners, focusing on the labor productivity indicator, which is a crucial determinant of competitiveness. Each quarter, the analysis presents indicators of productivity in the Brazilian industry and, annually, also includes indicators of productivity in the industries of Brazil’s main trading partners.
Source: CNI Press
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