Brazil’s services sector declined by 0.2% in January, exceeding economist expectations. The decrease, primarily in transport, reflects ongoing economic challenges amid high interest rates. Despite slight annual growth, concerns regarding overall economic performance persist, indicating potential risks to GDP forecasts.
Brazil’s services sector experienced a decline greater than anticipated in January, as indicated by data from the Brazilian Institute of Geography and Statistics (IBGE) released on Thursday. Service sector activity, which is crucial for the largest economy in Latin America, fell by 0.2% compared to the previous month, continuing a downward trajectory since reaching a peak in October of the prior year.
Economists surveyed by Reuters had projected a modest decline of 0.1%. This decline coincides with weaker industrial output data for January, as elevated interest rates exert pressure, while the central bank attempts to curtail inflation to its target of 3%. The current local benchmark interest rate is set at 13.25%, with indications of a potential increase of 100 basis points in the upcoming policy meeting.
The decrease in January’s services was chiefly attributed to the transport sector, which experienced a significant 1.8% month-on-month decrease. According to IBGE, three of the five principal categories surveyed reflected a downturn during this period. The agency has adjusted the services data for November and December upwards by 50 basis points each, yet economists maintain that the sector remains underperforming.
“Relative to our expectations, the services output disappointed even after revisions,” remarked Vinicius Moreira and Cassiana Fernandez from JPMorgan in a report. They also noted that while a slowdown in domestic demand is anticipated for the year, the latest data suggests a weaker-than-expected performance, which continues to pose risks to this year’s GDP growth forecasts.
On an annual basis, IBGE reported that services output grew by 1.6% in January compared to January 2024. This outcome fell short of economists’ expectations, as they had predicted a median increase of 1.9% based on a Reuters poll.
The services sector in Brazil displayed a notable decline in January, exceeding expectations and reflecting ongoing economic challenges. The 0.2% drop, primarily driven by the transport segment, underscores concerns regarding domestic demand and potential implications for GDP growth forecasts. Despite a year-over-year increase in services output, the overall performance signified continued vulnerabilities in the economic landscape as the central bank navigates inflation control measures.
Original Source: www.tradingview.com
