Dissatisfaction with interest rates leads small industry to pessimism – 06/26/2023 – Market

Dissatisfaction with interest rates led micro and small industry entrepreneurs to greater pessimism in the last year, according to a survey carried out by Simpi (Union of Micro and Small Industry of the State of São Paulo) and Datafolha.

In April and May 2023, the Macroeconomic Satisfaction Index of these companies reached 93 points, coming from 103 points in the previous survey (in February and March 2023), on a scale ranging from 0 to 200 points.

The peak of the series, which began in April 2022, coincides with the last elections, in October and November of last year. At that time, the industrialists’ satisfaction had been 122 points.

According to the entity, the drop in the index was caused, above all, by the negative perception that businessmen say they have regarding the economic situation: 48% answered that the scenario is bad or terrible and only 14% consider it good or excellent.

One of the main factors pointed to this pessimism is the high level of Selic, basic interest rates, currently at 13.75% per year and still without a signal from the Copom —the Central Bank’s Monetary Policy Committee— that it will start the cycle of falling interest rates.

From March to May, the percentage of companies that say they are being severely affected by interest rates increased from 52% to 66%. Those who say they were little affected were 24%, now they are 16%.

Among those who do not feel harmed, the percentage increased from 22% to 17%. In the comparison between regions, the highest percentage of those who feel very harmed was in the Northeast (77%) and lowest in the Midwest and North (63%).

When looking at the companies themselves, industrialists tend to be more optimistic: satisfaction with the business situation was 121 points in March and April, a similar level to the previous survey (122 points), although lower than in October and last November (135 points).

Satisfaction with billing was 140 points and 108 in relation to the profit margin. In the Southeast, satisfaction with the company’s situation reaches 128 points; in the Northeast, this index is 116.

The survey, nationwide, heard 712 people, between May 9 and 29, 2023. The margin of error for the total sample is 4 percentage points, more or less, and confidence is 95%.

Used as an instrument to control inflation, the Selic affects other rates, such as financial investments and financing.

“The more the Selic rises, the lower household consumption will be, with a tendency for inflation to fall. On the other hand, when it falls, there is a stimulus and a heating up of the market”, said the president of Simpi, Joseph Couri.

Despite this, he stated that he does not expect a significant reduction in interest rates in the near future. “I don’t see a real reduction. If all goes well, I see a small signal, in 90 days.”

Couri adds that the businessman has seen society’s purchasing power in decline, while he seeks to keep the company standing. This situation directly affects the economy and provokes a feeling of pessimism.

The fall in interest rates has been the main struggle between President Luiz Inácio Lula da Silva (PT) and the President of the Central Bank, Roberto Campos Neto. The petista has publicly expressed his dissatisfaction with the current Selic level.

Last week, during an official visit to Italy, Lula said that maintaining the current interest rate is irrational.

“I have been demanding from the senators. It was the senators who put this citizen there. So the senators have to analyze whether he is fulfilling what was approved for him to fulfill. In the law that is approved, he has to take care of inflation, economic growth and the generation of jobs. So he has to be charged. That’s all.”

“There is no acceptable explanation for why the interest rate is 13.75%. We do not have demand inflation”, he assessed. “I sincerely think that this citizen is playing against the interests of the Brazilian economy”, concluded the petista.

The most recent Focus Bulletin, published on Monday (26), points out that the market expects a Selic cut in August and that inflation will be lower in 2023 and 2024.

According to the Simpi survey, 17% of those interviewed made inquiries about taking loans or financing in April and May, coming from a level of 11% in the previous two months.

At the same time, 46% said they did not get the requested funds, 44% said they did and 10% did not get a response from the bank.