Brazilian business confidence slipped for the first time since August, as firms recalibrated expectations after the central bank held interest rates steady. The Business Confidence Index (ICE), published by the FGV IBRE research institute, fell 0.2 points in February to 92.4 on a seasonally adjusted basis — a marginal decline that ended five consecutive months of improvement during which the index accumulated 3.7 points of gains.
A Pause, Not a Reversal
Both the Current Situation Index and the Expectations Index declined by identical margins of 0.2 points, landing at 92.8 and 92.1 respectively. Three of four sectors lost ground: commerce fell 4.0 points to 87.3, construction dropped 2.5 points to 91.5, and services slipped 0.7 points to 90.2. Industry moved in the opposite direction, rising 0.6 points to 96.7.
FGV researcher Aloisio Campelo Jr. framed the result as a recalibration of the recovery that began last September rather than a shift toward pessimism. The three-month moving average rose 0.4 points in February — its fifth consecutive increase — suggesting the underlying trend remains positive.
The Selic Factor
Campelo pointed to a specific trigger: the central bank’s decision to hold the Selic benchmark rate at 15% at its January meeting, the highest level since 2006. For months, the prospect of rate cuts had been sustaining business optimism. When that expectation was not met, it cooled sentiment — particularly in rate-sensitive sectors like commerce and construction.
At 92.4, the index remains well below the 100-point threshold separating optimism from pessimism. But the trajectory since September has been consistently upward despite the February pause.
Tailwinds Ahead
Several factors could push confidence higher in coming months. Brazil’s income tax reform, signed into law in late 2025, took effect in January and exempts earners making up to R$5,000 (~$1,000) per month, removing an estimated 15 to 16 million Brazilians from the tax rolls. The fiscal impact is projected at R$31.2 billion (~$6 billion) in 2026, with most freed-up spending concentrated among lower-income households.
A higher minimum wage and the eventual prospect of Selic cuts add further demand-side support. Campelo said he expects the index to approach the 100-point neutral mark in coming readings as monetary easing eventually materialises.
What to Watch
Confidence improved in 47% of the 49 sectors surveyed, down from the previous month. Commerce was the weakest link, with every segment registering a decline — a warning for retailers heading into a year when consumer spending is supposed to be the economy’s main engine. Whether the tax reform’s stimulus reaches those businesses quickly enough to reverse the slide will be a key test ahead.