The services sector dropped by 0.9 percent in August, according to fresh data from the Brazilian Institute of Geography and Statistics (IBGE).
The drop confirms a slowdown trend in a sector that accounts for half of Brazilian formal jobs and roughly 70 percent of the gross domestic product — which could make it a beacon for the overall economy.
It was also a result that came far below the market’s forecasts. The median projection by analysts surveyed by finance newspaper Valor sat at a positive 0.4 percent growth rate.
The transportation segment dropped by 2.1 percent — the worst performance among all five surveyed segments. For Rodrigo Lobo, a research manager at IBGE, that decline was primarily influenced by decreased activities in port and terminal management and road cargo transportation.
The silver lining, Mr. Lobo said, is that the monthly result is also a reflection of a very high baseline — both from a recent e-commerce boom and also from the fact that the bulk of agricultural production is moved in the first semester of the year. “We have to observe how the cargo transportation segment will perform in the second semester, with a less buoyant agricultural production,” he adds.
In a note to followers, economist André Perfeito said the sector may need some stimulus to take off — such as recent moves by the federal government to help Brazilians dig themselves out of debt.
The Central Bank’s latest interest rate cuts could also foster consumption in Brazil, a country where credit is pivotal for both companies and consumers. The bank slashed the benchmark interest rate by a half percentage point in each of its two most recent policy meetings (taking it to 12.75 percent) and is expected to do the same at least in the next two until the end of the year.
“Total wages in Brazil are going up, but the Brazilian economy is still far from a point of taking off,” Mr. Perfeito pondered.
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