SMEs advance 5.2% in second quarter revenue

The turnover of small and medium-sized enterprises (SMEs) increased by 5.2% in the second quarter of 2024 compared to the same period in 2023, according to the Omie Index of Economic Performance of SMEs (IODE-SMEs). The positive result closes the semester with cumulative growth of 4.3% compared to the same period of the previous year.

The IODE-PMEs works as an economic thermometer of companies with revenues of up to R$50 million annually, consisting of monitoring 701 economic activities that make up four major sectors: Commerce, Industry, Infrastructure and Services.

According to Felipe Beraldi, economist and manager of Indicators and Economic Studies Omie(ERP) cloud management platform, SMEs benefited from the evolution of household income (OIS) with the performance of the labor market and government policies of income expansion OIS, and the impacts of the cycle of interest rate decline promoted by the Central Bank, between August of the previous year and May 2024.

Figure 1: IODE-SMEs

(Index number 2021=100)

Source: IODE-PMEs (Omie)

The sectoral analysis shows that the SMEs of Industry continue as the main contributor to the improvement of the market, with an advance of 11.9% (YoY) in the period. This progress continues to be disseminated among 18 of 22 activities in the sector, among them, (Lubricating oils, Metalurgy and’, & & (Impression and reproduction of recordings and 4Maintenance, repair and installation of machines and equipment’ registered high.

“The increase in domestic demand and reduction of cost pressures positively impact the small industry. Thus, part of the recovery of real revenues in the segment reflects the relief of producer inflation (IPA-FGV), which recorded deflation until May (-1.7% in the accumulated in 12 months)”, explains Beraldi

The economist points out that another highlight in the last quarter was the recovery of Trade SMEs, which registered an expansion of 4.6% compared to the second quarter of 2023. The results are both positive in wholesale (+7.5% YoY) highlighting 4,6% Books, newspapers and other publications, 2Cimento and 20Products of hygiene, cleaning and home conservation’ (+3,0% YoY), being Pharmaceutical Products with manipulation of formulas, ’, and better activities.

In Services, despite the still positive result in the second quarter (+0.6% YoY), signs of slowing are beginning to appear. “Although the income advance sustains the sector, the recent loss of confidence of economic agents may have harmed the billing of some” areas, comments Beraldi.

Among the most prominent activities are financial and insurance activities’, (Housing and Food’ and (Education’. On the other hand, (Administrative activities and complementary services’, which performed well at the beginning of the year, ended the second quarter in decline.

In the Infrastructure segment, in turn, SMEs differ from the behavior of the rest of the market and mark a decrease of 4.6% (YoY) in the second quarter of 20. The negative result reflects the poor performance in some segments of construction, such as infrastructure works and 4.6% (YoY) Building Construction. The advance of specialized services for construction, (Captation, treatment and distribution of water and ’, treatment and disposal of waste,’, however, prevented more abrupt falls.

Figure 2: IODE-PMEs ¡n sectoral openings

(2Q2024 x 2Q2023)

Source: IODE-PMEs (Omie)

In the division by regions, the IODE-SMEs also shows that the advance in the last quarter was driven by the performance of SMEs in the Southeast (up 2.2% compared to 2Q2023), Northeast (+9.5%) and South (+5.6%). In the Midwest and North regions, the IODE-SMEs showed a decrease in SMEs in the period (-2.2% and -9.5%, respectively).

SMEs expected to grow at GDP pace in 2025

Due to the resilience of the labor market (with unemployment approaching the low historical level of 7% in recent months) and the effects of the contained easing of monetary policy (with Selic falling since August last year), it is expected that SMEs maintain the recent growth trend in the second half and end 2024 with revenues 4.3% higher than 2023. For 2025, the expectation is high of 2%, a more contained bet and aligned with the forecasts for the Brazilian GDP.

According to Beraldi, a higher interest rate compared to previously expected (perspectives are between 9.5% to 10% a.a. . (MEans less stimulus to growth coming from credit. This results in less traction on consumption and investments. There is little room also for new impulses in the labor market and less intensity of fiscal stimulus next year in the face of the great need for adjustment in public spending.

“With this, we assume that the evolution of the SME market occurs concentrated in the Services and Commerce sectors (REFlecting the perspective of sustaining consumption of the” families, adds Beraldi.The expectation, still according to the economist, that interest rates will fall again in 2025 should also produce positive impacts on the Infrastructure sector, especially for construction.