Brazil’s Services Sector Stumbles as Transport Collapse Closes Out a Year of Cooling Growth

Every transport modal in the red — road, water, air, and warehousing — all falling at once. That was the picture Brazil’s statistics agency IBGE delivered on Thursday, revealing that the services sector, the economy’s largest engine at roughly 60% of GDP, contracted 0.4% in December from the prior month.

Transport services drove the decline with a 3.1% plunge. Air transport fell 5.5%, warehousing and postal services shed 4.9%, and road haulage declined 1.7%.

Passenger volumes dropped 3.9% while cargo contracted 1.6%. São Paulo posted a 0.3% loss and Santa Catarina, a key logistics hub, fell 3.9%.

The annual picture remains positive but fading. Services grew 2.8% for full-year 2025, the fifth straight expansion and part of a cumulative 31% surge since 2021. IT services led the five-year recovery at 84.4%, followed by professional services at 59.8%. But quarterly momentum slowed from 3.1% year-on-year in the third quarter to 2.8% in the fourth, with transport decelerating sharply from 4.3% to 1.5%.

The broader economy has been cooling under the Selic rate, held at 15% since June — its highest since 2006. Industrial production fell 1.2% in December, and GDP growth hit just 0.1% in the third quarter. The Copom has signaled that rate cuts could begin at its March 17-18 meeting. The IPCA closed 2025 at 4.26%, back within the target band, and markets project the Selic falling to around 12.25% by year-end.

Services inflation remains the hawks’ chief worry, but with the economy’s biggest sector visibly cooling and an October 2026 election approaching, the pressure to ease is building from every side.

Related coverage: Brazil’s Morning Call | Harvard Ranks the Dominican Republic as Latin America’s Only This is part of The Rio Times’ daily coverage of Latin American markets and financial news.