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BRASILIA (Reuters) – Services activity in Brazil slumped 11.7% in April, figures showed on Wednesday, the biggest fall since comparable record-keeping began nearly a decade ago as social isolation measures to combat the COVID-19 outbreak slammed the economy into reverse.
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Coming a day after data showed a record crash in April retail sales, the economy\’s incredibly weak start to the second quarter would appear to justify the expected cut in interest rates to a new low by the central bank later on Wednesday.
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Services account for around 70% of Brazilian economic activity, and April reflected the first full month of strict coronavirus-linked policies restricting people\’s movement in key states like Sao Paulo and Rio de Janeiro.
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According to statistics agency IBGE, the level of service sector activity in Brazil is now 27% lower than the peak in November 2014.
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The 11.7% month-on-month fall in April was more than the 10.5% drop forecast in a Reuters poll of economists and the biggest fall since IBGE began the series in January 2011.
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All five sectors surveyed by IBGE showed record declines in activity, with families-related services, which include hotels and restaurants, plunging 44.1% and transport and transport-related services falling 17.8%.
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On an year-on-year basis, services sector activity in Brazil fell 17.2% in April, IBGE said, also a record and more than the 15.8% fall forecast in a Reuters poll.
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The IBGE figures tally with IHS Markit\’s services purchasing managers index which fell to a record low 27.4 in April and remained at a depressed 27.6 in May, pointing to a deepening economic contraction.
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The central bank is widely expected to cut its benchmark Selic interest rate by 75 basis points to a new all-time low of 2.25% on Wednesday.
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(Reporting by Jamie McGeever; Editing by Nick Zieminski)
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