Service activity declines in Brazil despite new business increasing

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The tough times in Brazil continue according to the Markit Brazil Services Business Activity Index, which reported another contraction in output across the sector in seasonally adjusted terms.

However, there was some positive news, the index was up from 46.4% in February to a two-year high of 47.7 in March. “PMI data for Brazil reinforce perceptions that the economic downturn bottomed-out and that the only way is up. The past two years have proven challenging for businesses, but there is finally a light at the end of the tunnel,” said Pollyanna De Lima, Economist at IHS Markit.

In addition, amid reports of competitive prices charged to customers, demand for Brazilian services improved in March but still dropped. “Services activity fell again, says IHS Markit’s De Lima. “Though at a softer pace as companies benefited from a rise in new business. In part, this was supported by price discounts as companies sought to secure new work in the face of a competitive environment.”

The expansion in new business was the second in as many months, and the pace of growth picked up since February. Goods producers also recorded higher levels of order books, ending a 25- month sequence of contraction.

Manufacturers posted the first increase in production in over two years. This contributed to a rise in the seasonally adjusted Markit Brazil Composite Output Index from 46.6 in February to a 25-month high of 48.7. Nevertheless, the latest reading was still consistent with a contraction in private sector output overall.

De Lima concludes: “Manufacturing firms fared relatively better than their services counterparts, with the former seeing increases in both new projects and production for the first time in over two years. Goods producers still shed jobs, but at the weakest rate since late-2015.”

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