Brazil's services activity beats forecasts with 1.7% rise in March - Reuters Canada

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Customers sit in chairs at the tables arranged for maintaining social distance between guests at a dining room of a restaurant, as the city eases the restrictions imposed to control the spread of the coronavirus disease (COVID-19) in Sao Paulo, Brazil July 6, 2020. REUTERS/Amanda Perobelli

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BRASILIA, May 12 (Reuters) - Services activity in Brazil rose more than expected in March and at a record pace for the month, official figures showed on Thursday, marking a strong recovery from the severe downturn caused by the COVID pandemic.

Services activity increased 1.7% in March from February, more than double the 0.7% growth expected by economists according to a Reuters poll, reaching its highest level since May 2015, the government statistics agency IBGE reported.

That put the sector 7.2% above the level of February 2020, before the onset of the pandemic. All five activities surveyed in the sector expanded, with the biggest increases seen in transport at +2.7% and information and communication services at +1.7%, IBGE said.

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Services activity gained 11.4% from March 2021, also above the 8.5% increase forecast in the Reuters poll.

In the first quarter, it grew 9.4% over the same period last year, rising 1.8% over the previous quarter.

Research manager Rodrigo Lobo said the weak comparison base pushed the sector higher, noting that Brazil in March 2021 faced a second wave of COVID-19 that imposed strict restrictions on mobility.

"That's why in March, in the year-over-year comparison, there are very high rates for activities like air transport, for example," he said.

Brazil's Economy Ministry has argued that the performance of the services sector will support the economy this year, along with a stronger labor market and increased private investment, helping to mitigate the effects of high interest rates to battle double-digit inflation.

Following the results, Credit Suisse released a note to clients revising its outlook for GDP growth this year to 1.4% from 0.2% earlier, very close to the government's official estimate of 1.5%.

"Upside surprises in services were most expressive in sectors that were strongly affected by the pandemic, indicating a faster recovery of the economy’s supply side," wrote Solange Srour, chief economist at Credit Suisse Brazil.

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Reporting by Marcela Ayres; Additional reporting by Rodrigo Viga Gaier; Editing by Mark Potter, Paul Simao and Mark Porter

Our Standards: The Thomson Reuters Trust Principles.

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