productivity in brazilian manufacturing AWS
CNI Indicators Year 1 • Number 1 • July-September 2017
PRODUCTIVITY IN BRAZILIAN MANUFACTURING Growth in labor productivity drives up industry competitiveness Brazil performs better than the average for its main trading partners Labor productivity in Brazilian manufacturing industry grew in the third quarter of 2017, consolidating its upward trend started in 2016. Productivity is now up for the sixth consecutive quarter. Stimulated by the crisis, companies have invested in improving production processes and increasing efficiency, which has already been reflected in the productivity indicator.
2.3 2.2 2.1
NETHERLANDS GERMANY SOUTH KOREA UNITED KINGDOM
1.7 1.7 1.6
BRAZIL FRANCE
-1.7 -1.7 -3.4
-1.0
-0.1
UNITED STATES ITALY JAPAN MEXICO ARGENTINA
Compared to its top 10 trading partners, Brazil recorded the fourth largest increase, tied with the United Kingdom and behind the Netherlands, Germany and South Korea. The Brazilian performance was 2.2% higher than the average performance of its partners. However, it is worth noting that the relative performance of Brazilian manufacturing industry is still 25.8% lower than the level seen at the start of the 21st century.
Growth in labor productivity in manufacturing industry, 2015-2016 Output per hours worked Cumulative change (%)
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
LABOR PRODUCTIVITY IN BRAZILIAN MANUFACTURING INDUSTRY
Productivity picks up Workers’ productivity in Brazilian manufacturing industry – measured as output divided by hours worked – grew by 1.2% in the third quarter of 2017 as compared to the second quarter of the year, considering the quarterly averages of the seasonally adjusted monthly series.
quarter of 2017, it edged up by 8.1%, reflecting an increase in the amount of output (2.8%) and a reduction in hours worked in production (-4.9%). The recovery trend in the indicator observed since mid-2016 is driven mainly by the efforts of companies to step up efficiency and bring down costs in response to the domestic economic crisis. In 2016, investments made by companies were focused primarily on improving production processes (38% of companies), according to CNI’s Investment in Industry survey.
The increase in the indicator reflects a 1.2% increase in output, accompanied by a stability in hours worked in production on the same comparison basis. The indicator has been recovering since the second quarter of 2016. Between the first quarter of 2016 and the third
Quarterly labor productivity, Brazilian manufacturing industry, 2000Q1-2017Q3 Output per hours worked Seasonally adjusted - Index, base: 2000 average = 100
120
110
100
90
80 2000 Q1
2001 Q2
2002 2003 Q3 Q4
2005 Q1
2006 Q2
2007 Q3
2008 Q4
2010 Q1
2011 Q2
2012 Q3
2013 Q4
2015 Q1
2016 Q2
2017 Q3
Source: Prepared by CNI based on IBGE and CNI statistics.
Quarterly labor productivity, Brazilian manufacturing industry Output per hours worked Seasonally adjusted quarter-over-quarter change (%) 2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
-0.6
-0.2
0.4
-0.5
-0.5
2.7
0.2
0.1
1.6
2.0
1.2
Source: Prepared by CNI based on IBGE and CNI statistics.
2
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
Effects of the domestic economic crisis on labor productivity measures Labor productivity compares the volume of goods and services produced with the amount of labor used in production. The amount of labor can be measured either on the basis of the number of employed workers or of the number of hours worked in production.
In an environment of low growth and high uncertainty, companies take measures to bring down hours worked in production (by adopting collective vacations, giving training, reassigning workers to maintenance work, etc.) and avoid the costs of layoffs, re-hiring and training.
Between the first quarter of 2000 – when the series started – and the fourth quarter of 2010, the two indicators showed a similar trend: while output per worker grew by a total of 7.2%, output per hours worked rose by 7.6%.
Employee numbers tend to increase or decline at a slower rate than that of hours worked in production, which explains the difference between the two productivity measures.
Since 2011, the two measures have showed different trends, reflecting the effects of the economic crisis on the labor market. Between the first quarter of 2010 and the third quarter of 2017, productivity based on hours worked grew by 7.6%, while productivity based on number of employees dropped by 3.6%.
Thus, the measure of labor productivity based on hours worked is more appropriate. Moreover, when comparing different countries and years, the measure based on hours worked eliminates workforce differences regarding the work time regime (part- or full-time work, holidays, stoppages, etc.).
Quarterly labor productivity, Brazilian manufacturing industry, 2000Q1-2017Q3 Seasonally adjusted - Index, base: 2000 average = 100
120
110
100
90
80 2000 Q1
2001 Q2
2002 2003 Q3 Q4
2005 Q1
2006 Q2
2007 Q3
Productivity (output/worker) Source: Prepared by CNI based on IBGE and CNI statistics.
3
2008 Q4
2010 Q1
2011 Q2
2012 Q3
2013 Q4
Productivity (output/hour)
2015 Q1
2016 Q2
2017 Q3
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
INTERNATIONAL COMPARISON
Decline in Brazilian productivity relative to its top trading partners comes to a halt Productivity of Brazilian manufacturing industry workers relative to the average productivity of workers in the manufacturing sectors of Brazil’s main trading partners rose by 2.2% in 20161, as shown by the indicator of effective relative productivity. Compared to its top 10 trading partners, Brazil, along with the United Kingdom, posted the fourth
largest increase (both tied with 1.7%). The largest increase was recorded by the Netherlands (2.3%), followed by Germany (2.2%) and South Korea (2.1%). The manufacturing sector of Argentina showed the worst performance (down by 3.4%), followed by the Mexico and Japan manufacturing sectors (both down by 1.7%).
Effective relative labor productivity, Manufacturing industry, 2000-2016 Produto por horas trabalhadas Índice, base: 2000=100
100
90
80
70
60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Prepared by CNI based on statistics from IBGE, INDEC, INEGI, FUNCEX, The Conference Board and CNI.
Despite Brazilian manufacturing industry recovery, its performance in the long term is still negative. Over the last decade (2006-2016), Brazil recorded the lowest growth rate in labor productivity (5.5%). The growth rate of labor productivity in most of our trading partners was
at least twice as high as the Brazilian one. The largest increase was posted by South Korea (44%). As a result, the effective relative productivity indicator accumulated drop of 7.8%. Compared to 2000, when the historical series began, the decline reaches 25.8%.
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.
4
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
Labor productivity in Brazil and its main trading partners and effective relative productivity, Manufacturing industry Output per hours worked Cumulative change (%) YEAR
BRAZIL
UNITED STATES
ARGENTINA GERMANY MEXICO
JAPAN
FRANCE
ITALY
SOUTH THE UNITED KOREA NETHERLANDS KINGDOM
EFFECTIVE RELATIVE PRODUCTIVITY
YEARLY
2010
2.1
5.6
7.2
16.0
4.8
12.4
5.5
11.4
7.3
6.6
4.6
-5.3
2011
-0.9
-1.9
5.3
4.7
2.1
-2.6
4.3
2.0
3.0
4.0
3.2
-2.3
2012
-0.5
-1.9
-2.8
-2.4
2.4
3.0
0.7
1.1
0.6
0.1
-2.2
0.6
2013
2.6
1.3
1.7
-0.5
-0.2
3.3
2.2
1.4
1.6
-0.3
-2.1
1.7
2014
-0.3
-0.5
-1.7
4.0
1.9
1.9
0.6
1.9
0.6
1.6
2.5
-0.8
2015
0.4
0.6
1.2
0.5
-0.4
1.9
3.5
2.0
-0.1
1.4
-1.1
-0.5
2016
1.7
-0.1
-3.4
2.2
-1.7
-1.7
1.6
-1.0
2.1
2.3
1.7
2.2
LAST DECADE
2006-2011
1.6
16.9
17.2
6.6
7.1
4.8
11.7
5.5
37.2
7.4
9.3
-10.6
2011-2016
3.9
-0.7
-5.1
3.8
2.0
8.6
9.0
5.4
4.9
5.2
-1.4
3.1
2006-2016
5.5
16.2
11.2
10.7
9.2
13.8
21.7
11.3
44.0
13.0
7.8
-7.8
Source: Prepared by CNI based on statistics from IBGE, INDEC, INEGI, FUNCEX, The Conference Board and CNI.
i
Learn more For more information, visit: www.cni.org.br/e_produtividadenaindustria
PRODUCTIVITY IN BRAZILIAN MANUFACTURING | English version of “Produtividade na Indústria - Ano 1 Número 1 Jul-Set 2017” | Quarterly publication of the National Confederation of Industry - CNI | www.cni.org.br | Policy and Strategy Directorate - DIRPE | Research and Competitiveness Unit - GPC | Executive manager: Renato da Fonseca | Team: Renato da Fonseca and Samantha Cunha CNI Publishing Center | Graphic Design Supervision: Carla Gadêlha | Customer Service - Phone: +55 (61) 3317-9992 - email: [email protected]. This publication may be reproduced, provided that the source is mentioned. Document prepared on November 23, 2017.
PRODUCTIVITY IN BRAZILIAN MANUFACTURING Growth in labor productivity drives up industry competitiveness Brazil performs better than the average for its main trading partners Labor productivity in Brazilian manufacturing industry grew in the third quarter of 2017, consolidating its upward trend started in 2016. Productivity is now up for the sixth consecutive quarter. Stimulated by the crisis, companies have invested in improving production processes and increasing efficiency, which has already been reflected in the productivity indicator.
2.3 2.2 2.1
NETHERLANDS GERMANY SOUTH KOREA UNITED KINGDOM
1.7 1.7 1.6
BRAZIL FRANCE
-1.7 -1.7 -3.4
-1.0
-0.1
UNITED STATES ITALY JAPAN MEXICO ARGENTINA
Compared to its top 10 trading partners, Brazil recorded the fourth largest increase, tied with the United Kingdom and behind the Netherlands, Germany and South Korea. The Brazilian performance was 2.2% higher than the average performance of its partners. However, it is worth noting that the relative performance of Brazilian manufacturing industry is still 25.8% lower than the level seen at the start of the 21st century.
Growth in labor productivity in manufacturing industry, 2015-2016 Output per hours worked Cumulative change (%)
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
LABOR PRODUCTIVITY IN BRAZILIAN MANUFACTURING INDUSTRY
Productivity picks up Workers’ productivity in Brazilian manufacturing industry – measured as output divided by hours worked – grew by 1.2% in the third quarter of 2017 as compared to the second quarter of the year, considering the quarterly averages of the seasonally adjusted monthly series.
quarter of 2017, it edged up by 8.1%, reflecting an increase in the amount of output (2.8%) and a reduction in hours worked in production (-4.9%). The recovery trend in the indicator observed since mid-2016 is driven mainly by the efforts of companies to step up efficiency and bring down costs in response to the domestic economic crisis. In 2016, investments made by companies were focused primarily on improving production processes (38% of companies), according to CNI’s Investment in Industry survey.
The increase in the indicator reflects a 1.2% increase in output, accompanied by a stability in hours worked in production on the same comparison basis. The indicator has been recovering since the second quarter of 2016. Between the first quarter of 2016 and the third
Quarterly labor productivity, Brazilian manufacturing industry, 2000Q1-2017Q3 Output per hours worked Seasonally adjusted - Index, base: 2000 average = 100
120
110
100
90
80 2000 Q1
2001 Q2
2002 2003 Q3 Q4
2005 Q1
2006 Q2
2007 Q3
2008 Q4
2010 Q1
2011 Q2
2012 Q3
2013 Q4
2015 Q1
2016 Q2
2017 Q3
Source: Prepared by CNI based on IBGE and CNI statistics.
Quarterly labor productivity, Brazilian manufacturing industry Output per hours worked Seasonally adjusted quarter-over-quarter change (%) 2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
-0.6
-0.2
0.4
-0.5
-0.5
2.7
0.2
0.1
1.6
2.0
1.2
Source: Prepared by CNI based on IBGE and CNI statistics.
2
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
Effects of the domestic economic crisis on labor productivity measures Labor productivity compares the volume of goods and services produced with the amount of labor used in production. The amount of labor can be measured either on the basis of the number of employed workers or of the number of hours worked in production.
In an environment of low growth and high uncertainty, companies take measures to bring down hours worked in production (by adopting collective vacations, giving training, reassigning workers to maintenance work, etc.) and avoid the costs of layoffs, re-hiring and training.
Between the first quarter of 2000 – when the series started – and the fourth quarter of 2010, the two indicators showed a similar trend: while output per worker grew by a total of 7.2%, output per hours worked rose by 7.6%.
Employee numbers tend to increase or decline at a slower rate than that of hours worked in production, which explains the difference between the two productivity measures.
Since 2011, the two measures have showed different trends, reflecting the effects of the economic crisis on the labor market. Between the first quarter of 2010 and the third quarter of 2017, productivity based on hours worked grew by 7.6%, while productivity based on number of employees dropped by 3.6%.
Thus, the measure of labor productivity based on hours worked is more appropriate. Moreover, when comparing different countries and years, the measure based on hours worked eliminates workforce differences regarding the work time regime (part- or full-time work, holidays, stoppages, etc.).
Quarterly labor productivity, Brazilian manufacturing industry, 2000Q1-2017Q3 Seasonally adjusted - Index, base: 2000 average = 100
120
110
100
90
80 2000 Q1
2001 Q2
2002 2003 Q3 Q4
2005 Q1
2006 Q2
2007 Q3
Productivity (output/worker) Source: Prepared by CNI based on IBGE and CNI statistics.
3
2008 Q4
2010 Q1
2011 Q2
2012 Q3
2013 Q4
Productivity (output/hour)
2015 Q1
2016 Q2
2017 Q3
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
INTERNATIONAL COMPARISON
Decline in Brazilian productivity relative to its top trading partners comes to a halt Productivity of Brazilian manufacturing industry workers relative to the average productivity of workers in the manufacturing sectors of Brazil’s main trading partners rose by 2.2% in 20161, as shown by the indicator of effective relative productivity. Compared to its top 10 trading partners, Brazil, along with the United Kingdom, posted the fourth
largest increase (both tied with 1.7%). The largest increase was recorded by the Netherlands (2.3%), followed by Germany (2.2%) and South Korea (2.1%). The manufacturing sector of Argentina showed the worst performance (down by 3.4%), followed by the Mexico and Japan manufacturing sectors (both down by 1.7%).
Effective relative labor productivity, Manufacturing industry, 2000-2016 Produto por horas trabalhadas Índice, base: 2000=100
100
90
80
70
60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Prepared by CNI based on statistics from IBGE, INDEC, INEGI, FUNCEX, The Conference Board and CNI.
Despite Brazilian manufacturing industry recovery, its performance in the long term is still negative. Over the last decade (2006-2016), Brazil recorded the lowest growth rate in labor productivity (5.5%). The growth rate of labor productivity in most of our trading partners was
at least twice as high as the Brazilian one. The largest increase was posted by South Korea (44%). As a result, the effective relative productivity indicator accumulated drop of 7.8%. Compared to 2000, when the historical series began, the decline reaches 25.8%.
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.
4
Productivity in Brazilian manufacturing Year 1 • Number 1 • July-September 2017
Labor productivity in Brazil and its main trading partners and effective relative productivity, Manufacturing industry Output per hours worked Cumulative change (%) YEAR
BRAZIL
UNITED STATES
ARGENTINA GERMANY MEXICO
JAPAN
FRANCE
ITALY
SOUTH THE UNITED KOREA NETHERLANDS KINGDOM
EFFECTIVE RELATIVE PRODUCTIVITY
YEARLY
2010
2.1
5.6
7.2
16.0
4.8
12.4
5.5
11.4
7.3
6.6
4.6
-5.3
2011
-0.9
-1.9
5.3
4.7
2.1
-2.6
4.3
2.0
3.0
4.0
3.2
-2.3
2012
-0.5
-1.9
-2.8
-2.4
2.4
3.0
0.7
1.1
0.6
0.1
-2.2
0.6
2013
2.6
1.3
1.7
-0.5
-0.2
3.3
2.2
1.4
1.6
-0.3
-2.1
1.7
2014
-0.3
-0.5
-1.7
4.0
1.9
1.9
0.6
1.9
0.6
1.6
2.5
-0.8
2015
0.4
0.6
1.2
0.5
-0.4
1.9
3.5
2.0
-0.1
1.4
-1.1
-0.5
2016
1.7
-0.1
-3.4
2.2
-1.7
-1.7
1.6
-1.0
2.1
2.3
1.7
2.2
LAST DECADE
2006-2011
1.6
16.9
17.2
6.6
7.1
4.8
11.7
5.5
37.2
7.4
9.3
-10.6
2011-2016
3.9
-0.7
-5.1
3.8
2.0
8.6
9.0
5.4
4.9
5.2
-1.4
3.1
2006-2016
5.5
16.2
11.2
10.7
9.2
13.8
21.7
11.3
44.0
13.0
7.8
-7.8
Source: Prepared by CNI based on statistics from IBGE, INDEC, INEGI, FUNCEX, The Conference Board and CNI.
i
Learn more For more information, visit: www.cni.org.br/e_produtividadenaindustria
PRODUCTIVITY IN BRAZILIAN MANUFACTURING | English version of “Produtividade na Indústria - Ano 1 Número 1 Jul-Set 2017” | Quarterly publication of the National Confederation of Industry - CNI | www.cni.org.br | Policy and Strategy Directorate - DIRPE | Research and Competitiveness Unit - GPC | Executive manager: Renato da Fonseca | Team: Renato da Fonseca and Samantha Cunha CNI Publishing Center | Graphic Design Supervision: Carla Gadêlha | Customer Service - Phone: +55 (61) 3317-9992 - email: [email protected]. This publication may be reproduced, provided that the source is mentioned. Document prepared on November 23, 2017.
