Brazilian services activity stabilizes in January, services PMI rises to 50

Brazilian services activity stabilizes in January amidst renewed increase in new work, following contractions seen throughout the fourth quarter of 2017.

The headline PMI Business Activity came in at 50 in January from December’s 47.4. Where activity rose, panelists recorded new offerings and greater client bases. Those that hinted at a contraction stated fierce competition and a challenging economic scenario. The stabilization in services activity, along with a sustained growth in manufacturing production, led to an upturn in private sector output.

New business received by services companies increased at the beginning of 2018, after December’s stagnation. The upturn was linked to additional offerings being brought into market as well as strengthening demand conditions. Factory orders rose for the 11th consecutive month, although at the weakest rate since July 2017.

Service providers continued to forecast greater activity levels in the coming 12 months, with confidence stimulated by restructuring plans, projections of a better economic environment and projects in the pipeline. Additionally, the extent of optimism reached a four-month high. A strong level of sentiment was also recorded in the manufacturing industry.

Services costs surged in January, with inflation moving above its long-run path. There were wide reports of higher prices paid for fuel, water and energy. Goods producers registered a slower rise in overall cost burdens than in December, although inflation in this segment surpassed that seen in services. To curtail outlays, services companies shed jobs in the opening month of the year. Employment dropped for the 35th straight month, though at the slowest rate since October 2017. Meanwhile, negligible rise in headcounts was clear in the manufacturing industry.

Services data showed that capacity levels were more than enough to deal with current workloads, as seen by a marked drop in unfinished business. Backlogs have dropped in each month since August 2015. The pace of inflation was the strongest since May 2017, but only slight nevertheless, noted IHS Markit.

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