Investment grows and signals fall in the utilization rate of the productive capacity
Valor Econômico - 01/15/2008
Investments in civil construction and in machines and equipment have been growing strongly since 2006, but not to the point of preventing increase of the utilization rate of the installed capacity (Uric) of the industry. In a setting in which demand advances at a fast pace and inflation shows some signs of high, the attempt to measure what the maturity term of the investments is gaining importance, despite its being quite a complex task. The Central Bank (BC) has been manifesting concern with the indicator's evolution, recalling that the elevations of the installed capacity have previously coincided with inflationary acceleration. A retreat in the occupation levels would be important to draw away the risk of the monetary authority's beginning a cycle of high of the Selic rate. Economists of the MB Associados and of the LCA Consultores have warned that those estimates are not precise and may vary greatly from sector to sector. MB's head economist Sérgio Vale remembers that "such relationship can be quite variable and depends on the sustainability of the economy's growth." Thus, if the expansion of the economic activity is less stable and has a positive perspective for the next years, the estimated term for the maturity of the investments tends to decrease. He estimates that investments increased 13.3% in 2007, a strong rhythm, and that occurred over the robust expansion of 10% seen in 2006. It is an undeniably firm progress, but which did not prevent the elevation of the utilization rate of the industry, which went up from 80.4%, in December of 2005, to the record rate of 82.8% in October of 2007, in the series free from seasonal influences. If the gross formation of fixed capital (GFFC, which measures how much is invested in civil construction, machines and equipment) grew strongly in 2006 and 2007, why was that not enough to keep the installed capacity stable? The first and most obvious answer is that not all those investments have matured.