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Activity in the services sector fell by 0.2% in February, compared to January, according to the Monthly Services Survey (PMS) released Tuesday by the statistics agency IBGE.
The seasonally adjusted result was well below the median estimate of 20 consulting and financial firms consulted by Valor Data, which estimated a growth of 0.7%. The projections ranged between 0.3% and 1.8%.
The reading was even more negative because a revision pointed out that the fall in the first month of the year was 1.8% instead of 0.1%, as previously reported.
The sector has settled down in recent months after a stronger increase until August 2021, said Rodrigo Lobo, the manager of IBGE’s Monthly Services Survey (PMS). Negative rates dominated the last six months, but the balance stood at 0.1%. “Of the last six rates, four were negative [in August, September, January, and February] and two were positive [in November and December]. Although there is a predominance of negative rates, the balance of those six months was 0.1%, slightly positive and very close to stability,” he said. “This shows a more stationary service sector, an accommodation of the gains until August 2021,” he added.
According to Luca Mercadante, an economist at Rio Bravo Investimentos, the data shows that the services industry is disappointing expectations at the beginning of the year. “The result was very bad, mainly because of the expectations we had, but also because of the result we had previously in January,” he said. For him, the performance is being affected by the population’s loss of purchasing power. “We have seen income fall in recent months and this has an impact.”
When analyzing the year-over-year result – a 7.4% growth in services compared to February last year – the economist explained that it is due to the low base of comparison. “In February last year we were navigating a strong Covid wave. It’s still a recovery from those pandemic waves, and services were quite impacted by that,” he said.
Rafaela Vitória, the chief economist at Banco Inter, says that despite the normalization of circulation after the pandemic was controlled, the reduction in the households purchasing power, impacted by high inflation of food and fuel, and the ongoing monetary tightening will probably hold back the expansion of household demand in the coming months. “We do not expect more significant growth in the sector. It is likely to be between 0.5% and 1% this year,” she said.
On the other hand, Mirela Hirakawa, a senior economist at AZ Quest, says the PMS tends to impose caution on economists who were revising upward their GDP projections. “It brings an information that we started 2022 a little bit worse than we had previously expected. Therefore, these upward revisions to GDP are expected to cease, staying still below 1% and closer to the projection that we have, which is 0.6% for 2022.”
Economists with CM Capital pointed out that the latest IBC-Br – the Central Bank’s activity indicator that serves as a forecast of the GDP – was also below what the market expected. “We can deduce that the Brazilian economic activity, which last year had shown recovery from the pandemic period, is starting to slow down and this has been reflected by the activity indicators,” they wrote in a report.
Banco BV economist Carlos Lopes also classified the February PMS result as “weak” but said he does not see a consolidated weakness that will drag on for the entire year. “On the contrary, we still see this result as a one-off event. Perhaps still an extension of the worsening pandemic in January,” he said.
Mr. Lopes points out that services provided to families, which had a modest rise of 0.1%, were the most disappointing point in February’s data. “It could be a reflection of the pandemic that worried in January. Other than that, the other sectors in great part continue to recover well. We still maintain a positive view for services for the year despite this worse result in February,” he said.
Source: Valor International