Brazil’s private sector output growth moderates in March

Survey data for the month of March indicated that Brazil’s private sector output growth moderated. The seasonally adjusted IHS Markit Brazil Services Business Activity Index dropped to 50.4 from February’s 52.7, indicated a second straight month of growth in output throughout the sector. The upturn in business activity showed successful advertising and a stronger demand environment, with growth reportedly curbed by financial difficulties, client defaults and low employment.

The growth of new work received by service providers rose to the highest in more than five years. Firms showed having received new work thanks to marketing initiatives, greater client bases and a relatively improved economic environment. With growth of factory orders also rising, new work throughout the private sector as whole showed the largest rise since January 2013.

Services companies were strongly positive about the 12-month outlook for output. Growth was reportedly projected in line with the offering of new services, potential cost savings and favorable economic conditions. The level of positive sentiment was at a six-month high. Manufacturing sentiment also rebounded in March.

In the midst of ongoing attempts to limit costs, services providers in Brazil shed jobs again in March. The decline in employment was the thirty-seventh in as many months and sharp overall. Some companies showed the non-replacement of voluntary leavers. On the contrary, posts were created in the manufacturing industry, with jobs growth registered for the sixth month running. Operating capacities were enough to cope with greater workloads, as seen by further falls in outstanding business. Rates of backlog depletion moderated in both sectors, but stayed substantial.

Input cost inflation facing service providers eased to a three-month low in March as cheaper borrowing costs partially countered rising petrol and utility prices. At the composite level, the rise in input costs was likewise the slowest in the year-to-date. In general, service providers hiked their selling prices in response to higher operating costs.

The rise in charges was the third in as many months, though the softest over this sequence and only marginal overall. This was because of some firms lower charges amidst attempts to stimulate demand. Factory gate prices also rose at a weaker rate, although one that was sharp and above the average over the past year.

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