THE 1.4% growth in Brazil’s Gross Domestic Product (GDP) in the second quarter is a result of the continued strong dynamism of the labor market, the Federation of Industries of São Paulo (Fiesp) said in a note. “One of the reflections of this dynamism in the labor market has been the increase in wages, with real growth of 5.8% in average labor income in June 2024 compared to the same period of the previous year”, says the note. 
According to Fiesp, in addition to the strong growth rate of income linked to work, family income has also grown due to government transfers via welfare and social security benefits; the real increase in the minimum wage and the payment of court orders.
“It is worth noting that income in the 2nd quarter was also boosted by the advance payment of the 13th salary for retirees, pensioners and beneficiaries of INSS social security benefits. In this scenario, we estimate that the expanded wage bill grew by around 11% in real terms in the 2nd quarter of 2024 compared to the same period of the previous year.”
Regarding the performance of the manufacturing industry, Fiesp understands that this sector has been favored by the good performance of the capital goods and consumer goods category. The first category has benefited from the improvement in credit conditions and the recovery of business confidence.
In the first half of the year, the significant growth in the production of heavy vehicles, such as buses and trucks, contributed to this performance. The consumer goods category has been driven by the expansion of income, with emphasis on the growth in the production of machines, appliances and electrical materials of the so-called “white goods”.
From a structural point of view, the sector continues to face challenges, according to Fiesp. Although the Installed Capacity Utilization Level (NUCI) has reached a record level, the indicator is being measured in a context of deteriorated and reduced installed capacity.
In this scenario, based on the aggregation of data after 1996, Fiesp identified a long stagnation in the capital stock since 2015. This process is a reflection, among other factors, of the adverse economic environment, which has impacted the investment capacity of the manufacturing industry.
“We expect activity to settle in the second half of the year, due to the lower fiscal stimulus and the maintenance of restrictive monetary policy. Given the information available to date and, above all, due to the positive surprises in activity in the first half of the year, we revised the growth projection for the Brazilian economy from 2.2% to 2.7% in 2024. As for the GDP of the state of São Paulo, we revised the growth projection from 2.4% to 2.5% this year”, says the statement.
