Brazil’s service sector, a cornerstone of its economy, contracted by 0.5% in December 2024 compared to November, according to the Brazilian Institute of Geography and Statistics (IBGE). This marked the second consecutive monthly decline, following a sharper 1.4% drop in November, and brought the sector 1.9% below its October peak. Despite this, the sector grew 3.1% for the year, continuing its recovery from the pandemic.
December’s contraction reflected weaker demand and rising costs. The S&P Global Brazil Services Business Activity Index fell to 51.6 in December from 53.6 in November, indicating slower expansion but remaining above the growth threshold of 50. Businesses faced mounting pressures from currency depreciation and higher input costs, which led to the fastest price increases since August 2024.
Annual growth was driven by key segments like information and communication services (+6.2%), professional services (+6.2%), and family-oriented services (+4.4%). These gains were fueled by strong demand for IT solutions, legal services tied to government payments, and increased consumer spending on restaurants and entertainment amid record employment levels.
Brazil’s Service Sector Contracts in December, Capping Mixed 2024 Performance. (Photo Internet reproduction)
Brazil’s Service Sector Contracts in December, Capping Mixed 2024 Performance
Regionally, São Paulo and Rio de Janeiro led annual growth with increases of 4.5% and 4%, respectively. However, December declines in states like Santa Catarina (-5.2%) and Mato Grosso (-11.8%) highlighted vulnerabilities, particularly in transport services impacted by a weaker agricultural harvest.
The service sector ended the year 15.6% above pre-pandemic levels but faces challenges ahead. Business confidence hit a three-year low in December as firms grappled with inflationary pressures and high borrowing costs. While cautious optimism persists for improved demand in 2025, these headwinds could temper growth.
This mixed performance underscores the sector’s critical role in Brazil’s economic recovery while highlighting risks that could influence market trends and policymaking in the months ahead.
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