Downturn in Brazilian services activity slows down in August

The service sector of Brazil came closer to stabilization in the past month as a second straight monthly rise in new work added to a weaker drop in output that was just slight overall. The headline seasonally adjusted IHS Markit Brazil Services PMI Business Activity Index recorded a three-month high of 49 in August. In spite of the July’s print of 48.8, the August figure continues to indicate an overall decline in output. Drops were evident in Renting & Business Activities, Transport & Storage and Other Services.

The seasonally adjusted IHS Markit Brazil PMI Composite Output index recorded a three-month high of 49.6 in August. This is above the July’s print, hinting at a slower and a slight drop in private sector activity. On the contrary to the trend seen for services, manufacturers reported additional growth of production.

Services new work rose for the second consecutive month; however, at a marginal rate that was slightly changed since July. Where growth was seen, panellists commented on a greater number of client requests and higher bookings. An additional upturn in factory orders was seen in August, with growth rising to a three-month high.

Some service providers lowered their selling prices to secure new business. Throughout the service sector as a whole, output charges dropped at a marginal rate as the huge majority of survey participants continued to keep their prices same over the month. On the contrary, factory gate charges rose.

In spite of the rise in new work, services firms continued to report spare capacity in August. Moreover, outstanding business levels dropped at a noticeable rate that was the most rapid in six months. Similarly, goods producers recorded a marked decline in backlogs in the latest reporting period.

Staffing levels at service firms dropped for the thirtieth consecutive month. After rising to the most rapid rate since May, the pace of job losses was strong. Anecdotal evidence indicated that payroll figures were trimmed because of the ongoing attempts to lower operational costs. Manufacturing posts also dropped, though at one of the weakest paces in the 30-month period of contraction.

Meanwhile, services companies have retained an optimistic view towards growth outlook. Nearly 62 percent of panellists have reported positive expectations about the year-ahead outlook for business activity, with confidence boosted by anticipations of better market conditions, new proposals, greater investments and lower interest rates.

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