Brazil’s Service Confidence Rises Again, but the “Future” Signal Just Turned Down

Key Points

1. Service confidence rose for a second month, but it remains below the long-run “normal” level.
2. Firms report a steadier present, yet they are less sure the rebound lasts beyond the next quarter.
3. With Brazil’s policy rate still at 15%, this split mood helps explain slowing growth without a hard stop.

Brazil’s service companies finished December with a small but lift in confidence. The FGV IBRE Service Confidence Index (ICS) rose 0.5 point from November to 90.6, and the three-month moving average increased to 88.9.

FGV’s benchmark is 100, so the sector is still in below-average territory even after the late-year improvement. The real story sits inside the sub-indexes.

The Current Situation gauge (ISA-S) jumped 1.9 points to 95.0, its best level since March. Managers are saying day-to-day demand and business conditions feel a bit firmer as 2025 closes.

But optimism fades with distance. The Expectations index (IE-S) fell 0.9 point to 86.5, ending a three-month rise.

The split is striking: companies improved their view of demand over the next three months (86.9) while turning less confident about the six-month business trend (86.0). Translated: “We can see the next quarter, but we don’t trust the runway.”

FGV’s breakdown shows where momentum is concentrating. Professional services and information/communication supported the rise, while the consumer-facing “families” segment kept weakening, especially on expectations.

That pattern fits an economy where higher borrowing costs and tighter credit squeeze discretionary spending first. For readers abroad, this matters because services are the engine room of Brazil’s economy, shaping jobs, inflation pressure, and import demand.

It also helps decode the interest-rate debate. After holding the Selic at 15% for several meetings and signaling a “very prolonged” stance, the central bank is effectively trading short-term comfort for credibility on prices. Businesses, meanwhile, are telling you they feel the brake.

Year-on-year, the tone is still cautious: the index was 4.3 points lower than in December 2024 on the non-seasonally adjusted comparison.