Services sector sinks to a two-year low

The services sector, which is the backbone of the Brazilian economy, shrank by 1.6 percent from March to April, new data shows. 

In the 12 months through April, growth sat at 6.8 percent, reducing the pace of expansion from 7.3 percent in March, according to the Brazilian Institute of Geography and Statistics (IBGE). The reading is based on samples of gross revenue from non-financial companies.

Responsible for more than 70 percent of the country’s GDP, the services sector has been growing rapidly since Brazil began lifting Covid restrictions — so much so that even with the decline in April, it remains 10.5 percent above February 2020 levels, the last month before the pandemic hit Brazil. In the first four months of the year, services accumulated growth of 4.7 percent over last year.

Still, the negative April result could be indicative of an economic slowdown after better-than-expected Q1 GDP results that led to an upward revision of growth forecasts from banks, consultancies, and rating agencies.

Four of the five surveyed segments shrank in April, pulling the overall result down. As in March, the transport sector was the main driver of the decline, with related activities falling 4.4 percent, reversing part of the 7.5 percent gain in February and January.

“It is the weakest result since March 2021,” IBGE research manager Rodrigo Lobo said. “One of the reasons is the baseline. We had very strong movements in 2021 and 2022 that are now losing steam,” he added. 

This is the case for the cargo transportation segment, as well as ICT services.

The sole bright spot in the April reading came from the segment of services to families, up by 1.2 percent. This segment includes the food and dining industry, which gained 3.7 percent last month.

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