Brazil's Service Sector Sets New Record High in September
Wednesday, Nov 13, 2024 7:35 am ET
3min read Brazil's service sector has been on a roll, with September marking the fifth consecutive month of growth. The Brazilian Institute of Geography and Statistics (IBGE) reported a 0.9% increase in the sector, bringing the accumulated gain to 4.9% since April 2022. This positive trend is driven by the return of face-to-face activities, such as services provided to households, car rental, tourism, and transportation.
The transport and information and communication sectors have been the most significant contributors to the service sector's growth. These sectors combined accounted for 65.8% of the sector's volume in September 2022, according to the Monthly Service Survey (PMS) by the IBGE. The transport sector, along with support activities for transportation and mailing, had the highest share with 29.3% of the net operating revenue in 2021, followed by professional, administrative, and complementary services (27.5%) and information and communication services (21.0%).
Regional variations in face-to-face activity recovery have impacted the overall service sector performance. While 19 out of 27 Brazilian states followed the national trend, with significant increases in Rio de Janeiro (0.7%), Santa Catarina (2.6%), Rio Grande do Sul (1%), and São Paulo (0.1%), some regions like Paraná (-2.3%), Pernambuco (-1.6%), and Minas Gerais (-0.2%) faced declines. These regional differences highlight the uneven nature of the recovery and the importance of targeted policies to support growth in all areas.
Input costs and inflationary pressures have evolved in tandem with the recovery of face-to-face activities. The S&P Global Brazil Services PMI reported that input costs reached their highest level in over two years in August 2024, driven by currency depreciation and lingering flood effects. This rise in input costs has led to a sharp increase in selling prices, with both input and selling price increases remaining above long-term averages. Despite these inflationary pressures, employment growth has remained robust, fueled by business confidence and optimism about future sales and output. However, concerns over high borrowing costs and persistent inflation have tempered overall business sentiment.
Investors should monitor the trends in the service sector, input costs, and inflation closely. As face-to-face activities continue to recover, input costs and inflationary pressures may remain elevated, posing a challenge to the service sector's future growth. A balanced and analytical approach to investing, considering multiple perspectives and factors, is crucial in navigating these market trends and making informed decisions.
The transport and information and communication sectors have been the most significant contributors to the service sector's growth. These sectors combined accounted for 65.8% of the sector's volume in September 2022, according to the Monthly Service Survey (PMS) by the IBGE. The transport sector, along with support activities for transportation and mailing, had the highest share with 29.3% of the net operating revenue in 2021, followed by professional, administrative, and complementary services (27.5%) and information and communication services (21.0%).
Regional variations in face-to-face activity recovery have impacted the overall service sector performance. While 19 out of 27 Brazilian states followed the national trend, with significant increases in Rio de Janeiro (0.7%), Santa Catarina (2.6%), Rio Grande do Sul (1%), and São Paulo (0.1%), some regions like Paraná (-2.3%), Pernambuco (-1.6%), and Minas Gerais (-0.2%) faced declines. These regional differences highlight the uneven nature of the recovery and the importance of targeted policies to support growth in all areas.
Input costs and inflationary pressures have evolved in tandem with the recovery of face-to-face activities. The S&P Global Brazil Services PMI reported that input costs reached their highest level in over two years in August 2024, driven by currency depreciation and lingering flood effects. This rise in input costs has led to a sharp increase in selling prices, with both input and selling price increases remaining above long-term averages. Despite these inflationary pressures, employment growth has remained robust, fueled by business confidence and optimism about future sales and output. However, concerns over high borrowing costs and persistent inflation have tempered overall business sentiment.
Investors should monitor the trends in the service sector, input costs, and inflation closely. As face-to-face activities continue to recover, input costs and inflationary pressures may remain elevated, posing a challenge to the service sector's future growth. A balanced and analytical approach to investing, considering multiple perspectives and factors, is crucial in navigating these market trends and making informed decisions.
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