{"id":96817,"date":"2025-12-05T19:15:52","date_gmt":"2025-12-05T22:15:52","guid":{"rendered":"https:\/\/murray.adv.br\/?p=96817"},"modified":"2025-12-05T19:17:36","modified_gmt":"2025-12-05T22:17:36","slug":"service-sector-cools-more-sharply-than-expected","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/service-sector-cools-more-sharply-than-expected\/","title":{"rendered":"Service sector cools more sharply than expected"},"content":{"rendered":"
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Extractive industry and agriculture helped keep GDP growing in Q3 amid rising signs of economic slowdown<\/strong><\/em><\/h6>\n<\/div>\n<\/div>\n
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12\/05\/2025<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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The service sector\u2019s performance in the third quarter surprised economists, slowing more sharply than expected and diverging from other economic indicators such as labor-market conditions and household income. The sector was virtually flat in the period, rising just 0.1% compared with the previous quarter, below the 0.4% median forecast collected by Valor Data.<\/p>\n<\/div>\n

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\u201cIt was the service sector that explains the slight downside deviation in our full-year GDP projection,\u201d\u00a0ABC Brasil\u00a0<\/strong>wrote in a report. \u201cWhat we see here is the lagged effect of monetary conditions.\u201d<\/p>\n<\/div>\n

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\u201cIt was the negative highlight from the supply perspective. The market usually tracks the sector through the PMS, which is monthly and had been showing stronger results\u2014but it only covers part of the sector,\u201d noted\u00a0Luis Cezario<\/strong>, chief economist at Asset 1.<\/p>\n<\/div>\n

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He highlights the performance of the \u201cother services\u201d category, which includes services provided to households, that grew only 0.1% in the quarter. Such weak performance does not line up with labor-market dynamics, he said. One possible explanation is household indebtedness, now at historic highs.<\/p>\n<\/div>\n

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Thiago Xavier<\/strong>\u00a0of Tend\u00eancias adds that the weaker services data may reflect effects of the Brazilian Institute of Geography and Statistics\u2019 (IBGE) historical revision. He also emphasizes the weak performance of \u201cother services,\u201d which, together with financial intermediation, was one of the only categories to deteriorate relative to the second quarter.<\/p>\n<\/div>\n

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Industry grew more than expected in the quarter. Still, this does not reverse expectations of weak growth in 2025. Extractive industries and construction were the standouts.<\/p>\n<\/div>\n

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Fiscal constraints, a Selic rate at 15%, and the 50% surtax on Brazilian exports to the U.S.\u00a0<\/a>are obstacles to stronger expansion of domestic industrial activity. A more robust recovery is expected only in 2027, experts say.<\/p>\n<\/div>\n

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According to the IBGE, total industry rose 0.8% in the period. The highlight\u00a0was extractive industries<\/a>, up 1.7%\u2014the fourth consecutive quarterly gain.<\/p>\n<\/div>\n

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\u201cThis increase is largely due to aggregate demand, which re-accelerated the sector in the second half,\u201d said\u00a0Vitor Vidal<\/strong>, economist and founder of consulting firm VVC.<\/p>\n<\/div>\n

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Among all segments, manufacturing is the most affected and has been \u201cmoving sideways this year,\u201d stresses\u00a0Luis Ot\u00e1vio Leal<\/strong>, chief economist at G5 Partners.<\/p>\n<\/div>\n

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For next year, Leal expects slight improvement, driven by the beginning of interest-rate cuts and the positive effects of some goods removed in November from the U.S. 40% tariff list. \u201cHowever, a real recovery will only come in 2027,\u201d he says.<\/p>\n<\/div>\n

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Stefano Pacini,<\/strong>\u00a0economist at FGV Ibre, notes that even with a more favorable scenario, industrial activity will not pick up immediately because inventories remain very high.<\/p>\n<\/div>\n

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Agriculture posted a positive performance, driven by a favorable mix of climate conditions, record harvests, recovering prices, and strong export performance. According to IBGE, agricultural GDP grew 0.4% in the third quarter compared with the second.<\/p>\n<\/div>\n

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Growth in a third quarter is unusual because harvest activities generally end between July and September. However, over the past two years, the sector has faced delays in planting both first and second crops.<\/p>\n<\/div>\n

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For\u00a0Jos\u00e9 Carlos Hausknecht<\/strong>, partner-director at MB Agro Consultoria, the result was mainly boosted by recovering grain production. The sector continues to post record-level production and exports, overcoming even the effects of U.S. tariff hikes in key markets.<\/p>\n<\/div>\n

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Protein production has also been strong, helping to explain the prominent role of meat in GDP, according to Hausknecht. He adds that recovering yields in perennial crops such as sugarcane also contributed.<\/p>\n

*By\u00a0Marcelo Osakabe,\u00a0Isadora Camargo\u00a0and\u00a0Alex Jorge Braga\u00a0\u2014 S\u00e3o Paulo<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n

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