Labor productivity in the Brazilian manufacturing industry edged up by 0.8% in the second quarter of 2019 on a quarter-over-quarter basis. The indicator shows a rebound after trending downward during 2018.

The indicator is the ratio of the amount of output produced to hours worked in production. Also

Productivity grows again, but at slow pacecompared to the same quarter in the previous year, productivity posted growth of 2.0% after falling for two consecutive quarters.

While business confidence has been recovering since June, investment has not shown a strong rebound, thus negatively affecting productivity growth.

In 2018, productivity in Brazil grew above the average for its main trading partners

Between 2017 and 2018, labor productivity in Brazilian industry grew by 0.8%. Despite the weak performance, Brazil outperformed most of its main trading partners.

On the same comparison basis, effective labor productivity – which compares Brazil’s performance to the average performance of its main trading partners – grew by 1.1%.

Increase in labor productivity Manufacturing industry Output per hours workedChange between 2017 and 2018 (%)

-3.6

-2.1

-1.1

-0.1

0.6

0.6

0.8

1.2

1.3

2.3

3.4

Argentina

Mexico

Germany

United Kingdom

Italy

Japan

Brazil

United States

Netherlands

France

South Korea

CNI IndicatorsYear 3 • Number 2 • April-June 2019

PRODUCTIVITY IN BRAZILIAN MANUFACTURING

2

Productivity in brazilian manufacturing Year 3 • Number 2 • April-June 2019

LABOR PRODUCTIVITY IN BRAZILIAN INDUSTRY

Productivity grows by 0.8% in Q2Labor productivity in the Brazilian manufacturing industry – measured as the amount of output divided by the amount of hours worked in production – grew by 0.8% in the second quarter of 2019 on a seasonally adjusted quarter-over-quarter basis. The amount of output produced by the sector experienced a 0.6% increase, while hours worked edged down by 0.3%.

The indicator shows a rebound after dropping by 1.6% in the fourth quarter of 2018 and holding steady in the first quarter of 2019.

The result is also positive when compared to the figure for the same quarter in 2018. Productivity

edged up by 2.0%, reflecting a 1.8% increase in production, accompanied by a slight decline in hours worked (-0.2%). While business confidence has been recovering since June, investment has not shown a strong rebound, thus negatively affecting productivity growth.

According to CNI’s Industrial Survey, lack of demand is a major problem faced by industry in this second quarter of 2019. Frustration over an expected increase in demand has an impact on production and hours worked. Production has increased below expected levels, which explains why productivity has grown at a slower pace.

Source: Prepared by CNI based on statistics from IBGE and CNI.

Quarterly labor productivity, Brazilian manufacturing industryOutput per hours workedChange compared to the immediately preceding quarter, seasonally adjusted (%)

2016Q4

2017Q1

2017Q2

2017Q3

2017Q4

2018Q1

2018Q2

2018Q3

2018Q4

2019Q1

2019Q2

0.7 1.8 0.6 1.7 2.3 -0.6 -3.6 3.5 -1.6 0.0 0.8

Quarterly labor productivity, Brazilian manufacturing industry Output per hours workedSeasonally adjusted - Index, base: 2010 average = 100

Source: Prepared by CNI based on statistics from IBGE and CNI.

90

100

110

120

108.82019-Q2

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

3

Productivity in brazilian manufacturing Year 3 • Number 2 • April-June 2019

Albeit low, increase in productivity in Brazil exceeded that observed in most of its trading partners

INTERNATIONAL COMPARISON

In 2018, effective labor productivity grew by 1.1% from the year before. The indicator compares productivity in Brazil to the average productivity of its main trading partners.1 For the third consecutive year, the country has registered an increase in effective productivity. The indicator, however, grew at a slower pace than in the previous two years, as it edged up by 2.3% in 2016 and 3.2% in 2017.

Between 2017 and 2018, labor productivity in the Brazilian manufacturing industry grew by 0.8%. Despite the weak performance, Brazil outperformed most of its main trading partners. The Argentine and Mexican industries – two other cases of Latin American countries – experienced a decline in labor productivity, with the indicators falling respectively by 3.6% and 2.1%. Germany and the United Kingdom also recorded a decline in productivity. Japan and Italy performed very similarly to Brazil: productivity of their industrial

workers grew by 0.6% in both countries. The best-performing country in the period was South Korea, with a 3.4% increase.

In the last decade (2008-2018), productivity of Brazilian industrial workers grew by 11.6%, marking the sixth best result among the 10 partners considered. France showed the highest productivity gain: 26.8%, twice as high as Brazil’s growth rate. In the countries that showed productivity gains lower than those in France and higher than those in Brazil – Italy, Germany, the Netherlands and South Korea – the increases ranged from 15.2% to 17.4%. Productivity gains in Argentina were lower than in Brazil (3.7%), while Mexico and Japan registered a decrease in productivity. As a result, effective labor productivity – which compares Brazil’s performance to the average performance of its partners – grew by 3.0% in the last 10 years.

1 United States, Argentina, Germany, Mexico, Japan, France, Italy, South Korea, the Netherlands, and the United Kingdom. China is not considered due to lack of information.

Effective Productivity (Brazil compared to the average of its main trading partners), Manufacturing industry Output per hours worked Index, base 2000=100

65

70

75

80

85

90

95

100

105

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Prepared by CNI based on statistics from BLS; FUNCEX; IBGE; INDEC; INEGI; KOSIS; Ministry of Economy, Trade and industry; Ministry of Health, Labor and Welfare; OECD; The Conference Board and CNI.

4

i

Labor productivity in Brazil and its main trading partners and effective productivity, Manufacturing industry Output per hours workedCumulative change (%)

Source: Prepared by CNI based on statistics from BLS; FUNCEX; IBGE; INDEC; INEGI; KOSIS; Ministry of Economy, Trade and industry; Ministry of Health, Labor and Welfare; OECD; The Conference Board and CNI.

YEAR BRAZIL UNITED STATES ARGENTINA GERMANY MEXICO JAPAN FRANCE ITALY SOUTH

KOREA NETHERLANDS UNITED KINGDOM

EFFECTIVE PRODUCTITIVY

ANUAL

2012 -0.6 0.8 -2.8 -2.4 2.5 -0.1 0.7 1.1 -0.4 0.7 -2.2 -0.1

2013 2.7 -1.1 1.7 -0.7 -0.3 1.7 2.0 1.4 -1.0 -0.1 -1.8 2.7

2014 -0.3 1.4 -1.7 3.9 0.6 2.0 2.2 1.9 -2.6 2.4 3.0 -1.3

2015 0.3 -0.3 1.2 1.6 -1.5 -1.8 2.0 2.9 -3.5 1.0 -0.1 0.0

2016 1.8 -1.5 -3.4 5.1 -3.1 -0.2 1.3 0.9 2.9 1.6 0.3 2.4

2017 4.4 -0.1 2.3 1.8 -1.7 2.0 3.1 2.0 3.2 3.6 1.5 3.2

2018 0.8 1.2 -3.6 -1.1 -2.1 0.6 2.3 0.6 3.4 1.3 -0.1 1.1

CHANGE OVER THE LAST DECADE

2008-2013 4.2 6.6 9.5 4.7 8.1 -6.2 13.8 8.2 11.6 5.1 0.4 -2.3

2013-2018 7.1 0.7 -5.3 11.7 -7.6 2.5 11.4 8.5 3.2 10.2 4.5 5.4

2008-2018 11.6 7.3 3.7 16.9 -0.2 -3.8 26.8 17.4 15.2 15.9 4.9 3.0

Labor productivity in Brazilian industry did not show the same behavior over the decade considered. In the first five years (2008-2013), productivity contributed negatively to the competitiveness of Brazilian companies. Effective productivity edged down by 2.3%, meaning that the increase in productivity in Brazil was 2.3% lower than the average increase in productivity in its trading partners. During this period, among Brazil’s 10 main trading partners, the increase in productivity of Brazilian industrial workers (+4.2%) was only higher than that observed in the United Kingdom, which held almost steady (0.4%), and in Japan, whose indicator fell (-6.2%). The best performing countries were France, with a 13.8% gain, and South Korea, with an 11.6% increase.

In the second half of the 10-year period (2013-2018), effective productivity rose by 5.4%, more than offsetting the decline recorded in the first

half of the decade. Among Brazil’s top 10 trading partners, the only countries in relation to which productivity of Brazilian workers did not increase were Germany, France, the Netherlands, and Italy. In the Brazilian industry, productivity grew by 7.1%. Germany and France showed the best performance, posting productivity gains of 11.7% and 11.4% respectively. Argentina and Mexico in turn showed the worst performance, with losses of -5.3% and -7.6% respectively.

The upward trend in productivity in recent years has not been enough to offset the loss accumulated in the 2000-2014 period, during which effective productivity dropped by 24%. The downward trend came to an end in 2015. Between 2015 and 2018, effective productivity grew by 7%.

Learn moreFor more information, including previous editions, methodology and historical series, visit: www.cni.com.br/e_produtividadenaindustria

PRODUCTIVITY IN BRAZILIAN MANUFACTURING | English version of “Produtividade na Indústria, Abr-Jun 2019” | Quarterly publication of the National Confederation of Industry - CNI | www.cni.com.br | Industrial Development Board - DDI | Research and Competitiveness Unit - GPC | Executive manager: Renato da Fonseca | Analyse: Renato da Fonseca and Samantha Ferreira e Cunha | Coordinator: Carla Gadelha | Graphic Design: Simone Marcia Broch | Customer Service - Phone: +55 (61) 3317-9992 - email: sac@cni.com.br | This publication may be reproduced, provided that the source is mentioned. Document completed in August 30, 2019.

Productivity in brazilian manufacturing Year 3 • Number 2 • April-June 2019