October industry results reinforce the slowing trend

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– October data confirms a pattern: Brazilian industry is not in crisis, but it is a sector that is faltering, without its own strength, and increasingly dependent on extractive sectors. To return to sustained growth, the country will need to revitalize investments, reduce capital costs and strengthen manufacturing chains. Until that happens, we will continue to see numbers like these: positive, but insufficient – by the professor’s assessment.

Economist Stefano Pacini, a researcher at FGV Ibre, believes that the level of activity in the manufacturing industry has been gradually slowing since the middle of the second quarter. He highlights that the result of the November industry survey, conducted by FGV Ibre, sheds a yellow light on the performance of the sector at the end of the year, indicating a more intense accumulation of unwanted inventories, which is reflected in a sharp decline in the level of utilization of installed capacities in the month.

– When analyzed by sector, these indicators highlight the difficult situation facing the Brazilian industry: 63.2% of sectors are operating in a state of congestion, while 68.4% assess current demand, especially domestic demand, as weak. Utilization fell 2.2 points in November to 79.7%, the lowest level since March 2023 (79.2%). This variable is necessary to understand the pace of companies’ production, as it reflects the degree of use of machines and production factors. Since June 2025, the index has followed a downward trend, and the November result shows that the relevant sectors had a greater weight in this movement. This indicates a deepening trend of slowdown in the industrial sector, explains Pacini.

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Crivellaro draws attention to the decrease in intermediate goods – which feed the entire manufacturing chain – by 0.8%. When intermediaries slow down, it means that orders from downstream industries are smaller, indicating a slower end to the year.

— Consumption showed some reaction. Durable goods grew 2.7% in October, driven by vehicles, electronics and expectations for year-end promotions. But this improvement is subtle and does not change the structural framework: semi-durable and non-durable goods, linked to basic household consumption, recorded a decline of 2.5% this year. The behavior of these groups reinforces the macroeconomic reading: we have achieved stable inflation, a more competitive exchange rate, and very high interest rates. These three elements constitute a contradictory scenario – good for exporters, bad for manufacturing, credit and investment.

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“It is becoming increasingly clear that industrial production is slowing down,” says Luis Otavio Leal, economist and partner at G5 Partners. The cumulative growth in the manufacturing industry of only 0.2% in 2025 confirms this perception. In a report, Lille said he expects this loss of momentum to continue, “taking into account the very contractionary level of monetary policy and the high comparison base in the previous year, such that almost all of the expansion of Brazilian industry in 2025 will come from the extractive industry.”

The most sensitive data for October is the 0.6% decline in the manufacturing sector, which contains the largest number of jobs and the highest value added. Brazil once again shows a structural dependence on commodities, while the manufacturing sector remains fragile. Across major economic categories, capital goods rose 1% during the month, but accumulated a 0.6% decline over the year and a 2.9% decline compared to October 2024. This performance suggests that companies continue to postpone investments. With a Selic interest rate of 15% per annum, the cost of credit does not allow production capacity to be resumed steadily, says Crivellaro.

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It is estimated that the first quarter of 2026 should see a decline in activity. The combination of the dollar’s decline and the potential for interest rate cuts to begin could lead the industry to a slightly better outcome in the second quarter, with growth between 0.5% and 0.8%, which could lead to slightly better employment numbers in the sector.