7 out of 10 industries in São Paulo do not expect to hire – 07/14/2023 – Market

Seven out of ten (74.1%) industries in São Paulo say they have no intention of hiring new employees in the second half of this year, according to an exclusive survey carried out by Fiesp (Federation of Industries of the State of São Paulo).

Of the 25.9% of companies that claim they intend to hire in the second half of the year, the average expected hiring is equivalent to 10.3% of the total headcount.

The sector attributes most of the pessimism to the high level of Selic (basic interest), currently at 13.75% per year, which inhibits investments, makes it difficult to increase production and postpone hiring. Retail and services also join the industry in complaints about interest rates.

Despite an improvement in the economic scenario in recent months —in the wake of recent advances in tax reform and in the discussion of the new fiscal framework— and which reflected, in addition to the drop in inflation expectations and appreciation of the real against the dollar, the industry sees 2023 with concern.

After a deflation of 0.08% in June, according to the Sheet showed, the market is already working with inflation within the target in 2023.

When questioned about their sales expectations in the national market, 29.9% said they expect a normal to marked increase in sales in the second half of this year, 37.9% expect a drop in sales and 30.8% do not expect changes.

It is the worst expectation of increased sales in the domestic market since 2018.

452 representatives of the manufacturing industry in the state of São Paulo were interviewed, both micro (5.1%), small (61.2%), medium (27.8%) and large companies (5.9%). The survey was conducted between the 19th and 30th of June.

The chief economist at Fiesp, Igor Rocha, points out that the market is, in fact, more optimistic with the government and the industry feels the same. The research reflects, in parts, a time when fiscal challenges, regarding tax reform, were even more present.

“This sensitivity about the year not being so virtuous is due to interest rates. Interest rates affect industry more, which does not have subsidized credit and pays the highest tax rate in the entire economy. Agribusiness has the Safra Plan, industry has difficulty get credit. Although we can assess that there was an improvement in expectations that should be reflected in the next survey at the end of the year.”

The promise of a plan for the industry, along the lines of the Safra Plan, is something that has been mentioned by the Minister of Finance, Fernando Haddad. According to Rocha, the sector has been talking to the government for measures to reverse deindustrialization, which manage to go beyond the price reduction program for popular cars, but which are one of the hallmarks of the third term of President Lula’s (PT) government. .

“We can make a transition to segments that form a new wave of progress and we will be successful. In the automotive industry, we can put Brazil on a path with decarbonization. The Brazilian market can be a way of giving scale to this market, build a bridge to compete internationally”, says Rocha.

In an interview given this week, Minister Haddad also said that the government intends that the energy transition be the hallmark of the PT’s current mandate.

When looking at the second semester, 42.1% of the industrialists do not have expectations of changes, 31.5% are optimistic and 20% are pessimistic.

Earlier this month, the IBGE (Brazilian Institute of Geography and Statistics) reported that the country’s GDP (Gross Domestic Product) was up 1.9% in the first quarter compared to the fourth quarter of 2022. Growth exceeded expectations analysts, and had an impulse from agriculture.

Throughout the year, the president of Fiesp, Josué Gomes da Silva, has criticized high interest rates on several occasions. In March, he classified Brazilian interest rates as “pornographic” in a speech at the BNDES (National Bank for Economic and Social Development). In June, he said that high interest rates “are poison for the current economic reality.”

In his most recent weekly live, President Lula (PT) again said that the interest rate needs to fall and called the president of the Central Bank, Roberto Campos Neto, “tinky”.

According to the survey, at the beginning of 2023, the expectations of businessmen were to obtain better results in sales to the domestic market, in employability and in production — at the end of the first half, however, the reality is that there are no significant changes in expectations.

Regarding sales, 37.9% said they were optimistic, 22.9% thought the same about employment and 35.1% said so about production. In June, 18.8% said that sales went better than expected, 6.5% rated employment in their companies that way, and 14.6% said that about production.

In addition, almost half (49.2%) of those interviewed responded that the first half of this year was worse than the same period of the previous year — this result is also based on the indication of a drop in sales to the domestic market and in production volume .

Looking to the future, for 47.1% of industries in São Paulo, closing sales in 2023 should be worse than in 2022.

Industrialists from São Paulo are also more pessimistic about exports: 31.7% expect a drop that may even be accentuated, while 43.1% do not expect changes and 25.2% expect an increase.

The volume of production in the second half compared to the same period of 2022 should have a sharp drop or drop to 38.1%, at the same time, 31.1% expect a sharp increase or increase.