The machinery and equipment industry contracted by 18% in the first two months of the year.

Data from February 2026 reinforces the trend of slowing down the acquisition of machinery and equipment, indicating that the country is experiencing a clearer inflection point in its investment cycle. The 14.2% year-on-year drop in apparent consumption—to approximately R$ 29 billion—and, in this scenario, the 18.8% contraction in revenue directed to the domestic market, in the same comparison, indicate that the country's productive investment has entered a more evident contraction phase than previously anticipated at the end of 2025. More than the number itself, what is striking is the scope of the contraction: there was a simultaneous drop in purchases of both domestic and imported goods. This suggests that it is not a matter of supply substitution, but of effective compression of demand for productive investment. :: Investment contraction: from cyclical adjustment to deterioration of business decisions The 17.9% decline in apparent consumption in the first two months of the year shows that productive investment has lost significant traction. Restrictive monetary policy remains a central driver. Despite the Copom's decision to begin the easing cycle, the basic interest rate remains at highly contractionary levels, that is, above the neutral rate—the level at which the real interest rate keeps inflation within the target and output at its potential, without stimulating or slowing down the economy. However, other factors also help explain this movement. In addition to the high interest rate making investments in the financial market more attractive compared to the returns of the productive sector and increasing the cost of credit—making debt servicing more expensive for companies and increasing default rates—there is increased uncertainty regarding future demand, resulting from the economic slowdown. An example of this is agribusiness, one of the main markets for the machinery industry, which is expected to face a particularly challenging 2026. High default rates, stricter credit granting, high interest rates, and falling commodity prices are factors that have negatively impacted its investment decisions this year. Exports are growing, but the global scenario is uncertain. In the external market, the picture is more favorable, but still insufficient to compensate for internal weakness. In February 2026, exports of machinery and equipment reached US$ 1.043 billion, with growth of 20.5% over February 2025 and 24.6% over January 2026. In the accumulated total for the first two months of the year, there was an expansion of 12.0%, totaling US$ 1.88 billion; in 12 months, the increase was 8.0%. This is a positive performance, mainly supported by components and machinery destined for logistics and civil construction. Even so, there are important limits to this improvement. Part of the growth stems from a depressed comparison base at the beginning of 2025. The exchange rate effect is also noteworthy: in reais, the external result weighs less on total revenue because the appreciation of the real reduced the converted value of external sales, even with an increase in dollars and volume. Thus, the sector does find some support in the external market, but not with the intensity necessary to neutralize the domestic contraction. :: Imports and competitiveness: adjustment without structural gain The 2.7% drop in imports in the two-month period could, in theory, open up space for national production. However, this did not occur. The share of imports remains high, at 49.7% of consumption, and the decline in external purchases was less than the contraction in total demand. This data is particularly relevant: even in an environment of declining machinery imports, the national industry is unable to recover market share. This suggests that the competitive problem goes beyond the economic cycle and is related to structural factors, such as production costs, scale, and financing. :: Capacity, orders, and employment: adjustment underway, but still incomplete The level of utilization of installed capacity (78.5%) does not yet fully reflect the slowdown, partly because the adjustment in the production structure tends to occur with a lag. The order book — 6.7% lower in the two-month period — is a more leading indicator and points to a continuation of the weakness seen in recent months. The labor market is already showing signs of weakness in productive activity, with the closure of approximately 3,000 jobs in February, within a downward trajectory that began in 2025. This result indicates that companies are already adjusting their workforce structure to the new level of demand. However, this adjustment still seems partial. If the contraction in investments persists, it is likely that there will be an intensification of idle capacity and further workforce cuts throughout the year. :: Outlook Until February 2026, the performance of the Brazilian machinery and equipment industry can be summarized in four points: (1) the sector began the year with a more intense slowdown, with significant drops in revenue in the first two months; (2) the main weakness lies in the domestic market, where high interest rates, indebtedness, and less dynamic activity are delaying investment decisions; (3) Foreign trade offers some relief, with growth in dollar exports, but still insufficient to offset the domestic contraction; and (4) the structural pressure of imports remains high, with a strong Chinese predominance and almost half of the domestic market occupied by foreign suppliers. Although we continue to consider that part of the domestic demand for machinery and equipment will continue to be supported by the activities of the extractive and infrastructure industries, we have revised our projections downwards, given the weaker results at the beginning of this year, especially in sectors linked to the agricultural market and the manufacturing industry. Given a scenario of maintaining a restrictive monetary policy, coupled with the prospect of an economic slowdown and a less promising agricultural sector, we project growth of 0.7% in the domestic revenue of the machinery and equipment industry for 2026. For exports, the expectation is for an increase of 2.3%, but with a likely negative impact on total revenue due to the appreciation of the real expected for this year. 

This text was translated by machine from Brazilian Portuguese.