Deconcic assesses construction performance in 2021

Check out the data from the 7th edition of the report prepared by Fiesp's Construction Industry Department

Source: Fiesp

MATERIALS PRODUCTION

Industrial production of typical construction inputs closed 2021 with growth of 8.1% over the previous year, the largest annual variation in the historical series of IBGE's Monthly Industrial Survey, which began in 2012 and is the source of this information. The indication, however, is that production of these goods is slowing down, since, compared with the December 2020 result, production of these inputs fell by 11.6%, the fourth consecutive decline on this year-on-year basis.

Another indication is the slowdown observed throughout the second half of 2021 in both the year-to-date variation rate and the 12-month cumulative variation rate, which went from 10.8% through November to 8.1% through December, defining the result for the year, after peaking at 16.9% in the cumulative figure through June 2021.

Once again, as noted in previous bulletins, it is worth stressing the contribution of the base effect to this picture. The measures adopted to fight the COVID-19 pandemic depressed production of typical inputs in the first half of 2020, as shown in the chart below (which presents IBGE's production index for these goods since 2012, without seasonal adjustment), favoring the comparison with production recorded in the same period of 2021.

With the strong recovery in production in the second half of 2020, the base effect ceases to be positive, leading to a less favorable comparison with production in the same period of 2021. The net effect was, however, positive for the comparison of the year as a whole, with the aforementioned historically significant growth of 8.1%. The next chart reinforces this indication of a slowdown by showing the evolution of the 12-month moving average of the production index for these goods.

In the case of overall industrial production, growth in 2021 was 3.9%, the first positive result since 2018, following the declines recorded in 2019 (-1.1%) and 2020 (-4.5%). Taking only the December result, production rose 2.9% compared with November, based on seasonally adjusted data, the first positive monthly result after November's zero change and five consecutive months of decline (June to October), during which production contracted by a cumulative 3.3%.

Despite this month-on-month growth, the slowdown discussed above is also observed in the context of national industrial production. In the year-on-year comparison, for example, there was a 4.9% decline versus December 2020, while the year-to-date and 12-month variation rates continue to slow, with the latter going from 5.0% through November to 3.9% through December. In other words, the growth recorded in 2021 came, as IBGE survey manager André Macedo highlighted in a note, on top of a period of heavy losses (2020), without fully reversing the negative result of the previous year. In addition, as Macedo pointed out, the second half of 2021 was still marked by the effects of the COVID-19 pandemic on the production process, “such as higher production costs and a shortage of raw materials”, and on domestic demand, with inflation at higher levels and a labor market that, although showing some recovery, was still relatively weak.

Production in the Extractive Industries performed modestly in 2021, growing 1.1% over 2020, although well above the two previous years (-9.7% in 2019 and -3.4% in 2020). Month on month, production in this segment of overall industry rose 1.6% in December compared with November, seasonally adjusted, slowing from the previous month's result (5.0%) but helping to partially reverse the 9.9% drop recorded in October. Compared with December 2020, there was an expansion of 2.0%. Unlike the evolution of overall industry, the 12-month cumulative variation rate for Extractive Industries production showed a modest and steady acceleration from May 2021 onwards, after reaching -2.8% in the cumulative figure through April, closing the year with an expansion of 1.1%, as already mentioned.

Finally, production in the Manufacturing Industries grew more significantly last year, by 4.3%, likewise contrasting with the results for 2019 (0.2%) and 2020 (-4.6%). In December, production rose 2.0% compared with November, seasonally adjusted, the first positive result after six consecutive months of contraction on a month-on-month basis. Given its enormous weight in the composition of overall industry, the production trajectory of the Manufacturing Industries ended up shaping the evolution of the segment. As a result, this group of industries also saw growth slow down over the second half of 2021, with the 12-month cumulative variation rate going from 8.4% through August to 4.3% through December, and the same was observed for the year-to-date variation rate, which peaked in May (14.8%).

MATERIALS RETAIL

According to IBGE's latest Monthly Retail Survey, the sales volume of construction materials retail closed 2021 with growth of 4.4% compared with the previous year, a result below that recorded in 2020 (10.8%) and in line with the 2019 result (4.2%), despite the higher comparison base of 2020 (specifically, in the second half of that year), as shown in the following chart, which presents IBGE's seasonally adjusted historical series of the retail sales volume index for these goods. Regardless of the year-on-year comparison base, the chart reveals the declining trajectory of sales since June 2021, which contracted by a cumulative 8.9% between May and December, with sales volume in the last month of the year falling 1.4% compared with November, seasonally adjusted.

Compared with December 2020, there was a decline of -8.3% in the last month of 2021, the sixth consecutive negative result on this year-on-year basis. It is worth noting that the unfavorable base effect partly contributed to this sequence of results. This loss of momentum has been observed through the slowdown of both the year-to-date variation rate and the 12-month cumulative variation rate, which reached a peak of 23.7% through May before closing the year at 4.4%.

Retail sales volume under the narrower concept of the IBGE survey grew more modestly in 2021, by 1.4%, slightly above that seen in 2020 (1.2%) and below 2019 (1.9%). In December, volume was practically stable (-0.1%) compared with November, after seasonal adjustment. Compared with December 2020, there was a contraction of 2.9%, the fifth in a row on this year-on-year basis.

As with construction materials sales volume, retail sales also lost momentum in the second half of 2021, a movement that can be seen in the slowdown of the year-to-date variation rate, which peaked in May (6.8%), and of the 12-month variation rate, which, after reaching 5.9% in the cumulative figure through July, closed the year at 1.4% (a difference of 4.5 percentage points).

Finally, with regard to the sales volume of expanded retail, which includes, in addition to the segments of the narrow index, the construction materials segment and the vehicles, motorcycles, parts and components segment, growth in 2021 was relatively better, with an expansion of 4.5%, exceeding the results of 2019 (3.9%) and 2020 (-1.4%). The expansion in sales volume of the vehicles, motorcycles, parts and components segment, whose sales rose 14.9% in 2021, was decisive for this performance. Month on month, expanded retail also performed better, albeit on a small scale, rising 0.3% compared with November, seasonally adjusted. The comparison with December 2020, on the other hand, was unfavorable, with a 2.7% drop recorded in the last month of 2021.

Although a loss of momentum in expanded retail sales was also observed in the second half of last year, this movement was less pronounced, since the 12-month cumulative variation rate slowed from 8.4% (the highest level of the year) to 4.5% through December, a difference of 3.9 percentage points, below the 4.5-point difference recorded for narrow-concept retail, as seen above.

CONSTRUCTION COSTS

In January, the national average construction cost, measured by the National Construction Index of IBGE's National System of Construction Costs and Indices Survey (Sinapi), rose 0.72% over the previous month, exceeding the December result (0.52%) but remaining below the rate recorded in January 2021 (1.99%). The chart below compares the monthly variation of the average cost for the month of January since 2015.

Despite the lower rate compared with January 2021, the variation in January 2022 was still higher than that observed in previous years, which is due, as the chart also shows, to the increase in the average cost of labor, whose rise was particularly influenced by collective bargaining agreements in Alagoas, Tocantins and Piauí, as IBGE highlighted in a note. On the other hand, the 12-month cumulative variation rate slowed again, going from 18.65% through December, which corresponded to the annual variation recorded in 2021, to 17.17% through January. It is worth remembering that this slowdown began back in August 2021, when the cumulative variation on this basis reached 22.74%.

As for the average cost of materials, one of the components of the national average cost, the variation recorded in January was 0.63%, the lowest monthly rate since July 2020 (0.48%), and therefore below that observed in December (0.76%) and in January last year (2.96%). As IBGE itself pointed out when releasing the Sinapi data, January saw less pressure on the materials cost side, including deflation for certain products, such as those in the steel segment. Partly reflecting this recent trajectory, the 12-month cumulative variation in the average cost of materials continued to slow (a trajectory that began in August 2021, when this rate was 37.69%), going from 28.12% through December (year-end) to 25.22% through January.

The average cost of labor, in turn, moved in the opposite direction, rising 0.87% in January, exceeding both the December result (0.15%) and that of January 2021 (0.78%). In addition to the contribution of collective bargaining agreements to the January increase, as mentioned above, another factor fueling the rise in labor costs in January, as IBGE rightly pointed out, was the 10.2% increase in the national minimum wage, to R$ 1,212.00, impacting the pay of unskilled categories, whose wage floor is very close to this amount. In contrast to the evolution of the materials component, the 12-month cumulative variation rate of labor costs accelerated again, going from 6.78% through December to 6.87% through January, returning to the level observed in October 2021 (6.88%), which was last year's highest rate on this basis.

In monetary terms, in January, the national average cost reached R$ 1,525.48 per square meter, with R$ 915.79 corresponding to the materials component and R$ 609.69 to labor. Regionally, costs per square meter in the first month of the year were R$ 1,525.10 in the North region, R$ 1,433.20 in the Northeast region, R$ 1,579.80 in the Southeast, R$ 1,599.93 in the South and R$ 1,515.22 in the Center-West region.

SAVINGS DEPOSITS – SBPE

The total balance of savings deposits in the Brazilian Savings and Loan System (SBPE) reached R$ 778.570 billion at the end of January, according to the latest Savings Report from the Central Bank of Brazil. In real terms, this amount was 2.0% lower than at the end of December and 10.3% below the January 2021 balance. It is worth noting that the SBPE balance has been declining since December 2020, when it reached R$ 886.834 billion, at January 2022 prices.

Net inflows into the system turned negative again in January, at R$ 15.678 billion, in line with the historical pattern of negative results for the month, as illustrated by the following chart, which presents the Central Bank of Brazil's historical series starting in 1995, at constant prices of the latest month, for inflows recorded in January. The concentration of specific expenses at the beginning of the year, such as certain taxes (IPTU and IPVA), is decisive for this pattern. As for the magnitude of net inflows last January, it did not exceed the amount recorded in the same month of 2021, although it was larger than those recorded between 2015 and 2020, whose average was just under R$ 10 billion negative, always considering inflation-adjusted data for the period.

REAL ESTATE FINANCING

Operations contracted with funds from the Brazilian Savings and Loan System (SBPE), which cover financing for both construction and property acquisition, reached R$ 16.745 billion in December, declining for the first time in the year on a year-on-year basis, with a real decrease of 18.6% compared with December 2020. The data come from the Brazilian Association of Real Estate Credit and Savings Entities (Abecip) and the Central Bank of Brazil.

For 2021 as a whole, these operations totaled R$ 205.407 billion in nominal terms, with real growth of 31.7% over the total value of operations carried out in the previous year, slowing from the annual growth recorded in 2020 (37.6%) but exceeding the annual variations of the 2011–2019 period. Over a shorter time horizon, the indication is still one of slowdown when analyzing the trajectory of the 12-month cumulative variation rate of these operations, with the rate going from 41.0% through November to 31.7% through December – still high by historical standards, it should be noted.

Looking only at acquisition operations, these reached R$ 11.595 billion in December, 15.5% below the amount recorded in the same month of 2020, in real terms. As a result, 2021 closed with a total of R$ 164.789 billion in nominal terms for these operations, representing real growth of 39.2% compared with the previous year, slightly below the rate recorded in 2020 (40.3%). In terms of the 12-month cumulative variation, it is worth noting that the slowdown observed since July 2021 continued, with the rate going from 47.3% through November to 39.2% through December, corresponding to the result for the year.

The value of construction operations reached R$ 5.150 billion in December, the highest monthly figure of the year. Despite this positive highlight, this amount was 24.9% below the value recorded in the same month of 2020, adjusted for inflation. Over the year, R$ 40.618 billion was allocated to construction financing in nominal terms. In real terms, this total meant growth of 8.0% over the 2020 result, considerably below the previous year's result (30.0%). This annual slowdown is also captured by the evolution of the 12-month cumulative variation rate, which went from 20.7% through November to 8.0% through December, always in real terms.

In the last month of 2021, 64,755 units were financed with SBPE funds, of which 23,975 units corresponded to construction operations and 40,780 units to acquisition. Compared with December 2020, the number of financed units grew by 15.8%, the lowest rate of the year on a year-on-year basis, while for units financed for construction, growth was 75.0%, likewise the lowest year-on-year variation of 2021. In terms of units financed for acquisition, December closed with a 3.4% drop compared with the same month last year, the first negative year-on-year result since December 2017.

Over the year, a total of 866,331 units were financed, representing growth of 103% over the total number of units financed in 2020. For construction operations, the year closed with 288,046 financed units, up 298.6% from the previous year's total, while for acquisition financing operations, the total number of units in 2021 reached 578,285, 63.1% higher than in 2020.

Source: https://www.grandesconstrucoes.com.br/Noticias/Exibir/deconcic-avalia-o-desempenho-da-construcao-em-2021

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