RSS   Newsletter   Contact   Advertise with us

Record fall in new work in Brazil service sector

Christian Fernsby ▼ | June 4, 2020
May’s PMI data indicated that the coronavirus disease 2019 (coronavirus) pandemic continued to have a severe impact on the performance of the Brazilian services economy.
Brazil factory
PMI data   Brazil factory
Activity fell at a rate close to April’s survey record, whilst new business contracted at an unprecedented pace.

Topics: Brazil

Job shedding also intensified and was the second-sharpest in over 13 years of data collection as confidence about the future remained negative overall.

Prices data showed that operating expenses continued to increase, but only modestly and at the slowest rate in the past five years.

Discounting of average tariffs intensified as firms struggled to retain clients in the challenging business environment.

The headline seasonally adjusted IHS Markit Brazil Services Business Activity Index was little changed in May, posting at 27.6 compared to April’s 27.4.

The latest reading was indicative of another substantial contraction in service sector activity.

The coronavirus pandemic remained a dominant feature within anecdotal evidence provided by Brazilian service providers.

Limitations on economic activity was widely reported to have weighed on demand and new business, both at home and amongst foreign clients.

May’s survey showed that overall new business declined for a third month in succession and at a fresh survey-record pace.

New export business, whilst not falling to the same degree as April’s record, nonetheless continued to fall sharply.

With overall workloads continuing to dwindle, firms chose to make further reductions to their staffing levels.

The latest fall in staffing levels was considerable, accelerating to the secondsharpest rate in the survey history.

Employment has now declined for three months in succession.

Job losses were in part driven by cost considerations.

Although operating expenses continued to increase, they did so only modestly and at the slowest rate in over five-and-a-years.

Also pushing down on inflation was evidence of lower fuel costs.

In contrast, many companies continued to indicate that the price of personal protective equipment had risen during May.

With demand for services down, and providers trying to retain current clients, discounting was increasingly widespread during May.

According to the latest data, output charges were reduced for a second successive month, with the rate of deflation the sharpest in four years.

Finally, Brazilian service providers remained pessimistic overall about future activity levels.

Whilst not quite as negative as April’s survey record, May data marked a third successive month that firms have signalled pessimism about activity over the next 12 months.

There remained concerns over the longer-term impact on activity and business performance owing to the coronavirus pandemic.