RIO DE JANEIRO, BRAZIL – Private sector business activity in Brazil shrank in January for the first time since July, a purchasing managers’ survey showed on Wednesday, as a surging COVID-19 second wave threatens to hit economic growth in the first quarter and even push it into reverse.
The decline in activity was led by the dominant services sector, which shrank for the first time since August and at the fastest rate since July, according to IHS Markit’s latest PMI survey.
The headline Brazil services PMI fell to 47.0 from 51.1 in December. The composite PMI including manufacturing fell to 48.9 from 53.5, snapping a run of five months of growth.
A PMI reading above 50.0 signals expansion, and a reading below shows contraction.
“The January PMI survey results indicate that the Brazilian economy is at risk of going back into contraction in the opening quarter of 2021 as a spike in COVID-19 cases heavily impacted on the private sector,” said Pollyanna De Lima, economics associate director at IHS Markit.
“Manufacturing managed to stay in expansion mode, though growth rates eased noticeably since the end of 2020. The larger service sector, however, suffered a blow from squeezed income and a subsequent deterioration in demand,” she said.
As a result, new business, output and employment all fell in the month.
The services employment index fell to 48.2 from 49.3, marking the second month of job losses. That pulled the composite employment index across manufacturing and services down to 48.9 from 50.4.