Brazil's service sector has contracted for the first time in sixteen months due to a decline in new orders, according to recent survey data released by S&P Global.
The seasonally adjusted S&P Global Brazil Services Business Activity Index fell to 47.6 in January from 51.6 in December, with any reading below 50 indicating a contraction. This represents the most significant decline in service activity since April 2021.
January's downturn in business activity has been linked to weakened demand and a sharp reduction in new business inflows, marking the steepest drop in nearly four years. Nevertheless, employment in the sector experienced marginal growth for the third consecutive month.
On the pricing front, input cost inflation hit a 30-month high due to the strength of the US dollar, rising international prices, and a generally inflated domestic market. Consequently, selling prices saw their sharpest increase in two and a half years.
Despite these challenges, service providers remain optimistic about future output, largely based on expectations of improved demand and more favorable economic conditions.
The composite output index dropped to 48.2 from 51.5 in December, indicating the fastest contraction in the Brazilian private sector since April 2021.
In parallel developments, Brazil's industrial production declined by 0.3 percent in December following a 0.7 percent decrease in November, as reported by the statistical office IBGE. This marks the third consecutive month of decline. Despite this, industrial production stands 1.3 percent above pre-pandemic levels, though it remains 15.6 percent below the peak reached in May 2011, according to the agency.
