By Jamie McGeever
BRASILIA (Reuters) – Private sector economic activity in Brazil rose in August at its fastest pace in over seven years, a purchasing managers’ survey showed on Thursday, as a bumper month for manufacturing compensated for further service sector weakness.
The divergence seen since the onset of the COVID-19 pandemic persisted, as activity in the dominant services sector shrank for a sixth straight month and manufacturing expanded at its fastest pace on record.
IHS Markit’s Brazil services purchasing managers index (PMI) rose to 49.5 in August from 42.5 in July, and the composite PMI encompassing manufacturing rose to 53.9 from 47.3.
A reading above 50.0 marks expansion, while a reading below signifies contraction. Services is still shrinking, just, but the composite index was the highest since January 2013.
Paul Smith, economics director at data provider IHS Markit, said ongoing job losses, subdued confidence and rising costs suggest the services sector is still struggling to regain “meaningful” momentum.
“Nonetheless, a rise in new business, albeit modest, provides some hope for the future, with reports of a steady resumption of market activities and some firming of demand,” Smith said.
“More of this will be needed for the services economy to experience real recovery in the coming months,” he added.
Figures on Tuesday showed that Brazil’s economy shrank by a record 9.7% in the second quarter, with almost all sectors of the economy posting historic declines..
Central bank president Roberto Campos Neto said on Wednesday he expects the economy to contract by around 5% this year and rebound by 4% or more next year.
IHS Markit’s PMI data for August showed that the services new business index rose to 51.4, the first growth since February, and the business expectations index rose to 70.6, the highest since January.
The employment index rose to 45.0 from 40.0 in July, IHS Markit said, but this still reflected the sixth consecutive month of significant job cuts.
(Reporting by Jamie McGeever; Editing by Chizu Nomiyama)
