SAO PAULO (Reuters) – Services activity in Brazil grew by much more than expected in May from the previous month, data from statistics agency IBGE showed on Wednesday, paring some of the losses seen in April despite the country’s high interest rate levels.
The service sector, which accounts for about 70% of all activity in Latin America’s largest economy, rose 0.9% in May on a monthly basis, IBGE said, well above a market consensus of 0.3% in a Reuters poll.
“The services sector continued with an overall solid performance,” J.P. Morgan economists Vinicius Moreira and Cassiana Fernandez said in a note to clients. “The sector appears to be slowly recovering from a weak first quarter.”
IBGE said the monthly growth came on the back of growth in four out of the five main groups surveyed, with transportation the outperformer as the country moves a bumper grain crop.
Brazil’s service sector has alternated between highs and lows this year, with increases reaching as much as 1.3% (in March) and drops as much as 3.4% (in January), sputtering as interest rates remain at a six-year high of 13.75%.
On a yearly basis, services activity was up 4.7% in May, IBGE added. Economists had forecast a median rise of 3.8% in a Reuters poll.
The sector is now 11.5% above its pre-pandemic levels, the statistics agency said, although still 2% below its all-time high set in December of last year.
(Reporting by Gabriel Araujo; Editing by Chizu Nomiyama)
