Service confidence in Brazil has third consecutive advance

RIO DE JANEIRO, BRAZIL – In May, the Brazilian services confidence registered its highest level in seven months due to an improvement in the perception of the current moment of the sector and the coming months, showed data released on Monday, May 30, by Getulio Vargas Foundation (FGV).

In May, the Services Confidence Index (SCI) advanced 2.1 points to 98.3, the highest since October 2021 (99.1). It was its third straight month of advance.

“This month’s rise was influenced by the improvement in the perception of the volume of services in the month and the favorable evolution of expectations,” explained FGV/IBRE economist Rodolpho Tobler in a note. “Other positive points are approaching the neutral level of 100 points and the spread among segments.”

The Current Situation Index (ISA-S), an indicator of the perception of the present moment of the services sector, gained 2.1 points, to 98.1 points, the highest level since December 2013 (99.1), according to FGV.

The Expectations Index (IE-S), which reflects the outlook for the coming months, rose 1.9 points to 98.5 points, the highest since December 2021 (98.7).

“In the short term, it is still possible to imagine a continuity of the positive trajectory with the release of resources that can stimulate demand, thus recovering the losses that occurred throughout the pandemic,” Tobler evaluated. “In the medium and long term, the unfavorable macroeconomic environment seems to be an impeding factor.”

Data released by IBGE earlier this month showed that the Brazilian service sector ended the first quarter of 2022 with volume above expectations in March and the strongest result for the month in the historical series that began in 2011.

TRADE CONFIDENCE

Trade confidence rose again in May after two months of decline.

The Trade Confidence Index (ICOM) advanced 7.4 points in May, from 85.9 to 93.3, the highest level since October 2021 (94.2 points). The indicator rose 2.1 points in quarterly moving averages, the third consecutive positive result.

In May, the increase was widespread in all six main segments of the survey. The positive result in the month was influenced by the improvement in both the Current Situation Index (ISA-COM) and the Expectations Index (IE-COM). The ISA-COM rose 8.2 points, the third consecutive positive result, reaching 101.1 points, the highest value since August 2021 (105.0 points). IE-COM advanced 6.1 points, reaching 85.7 points.

“The ISA exceeds 100 points, influenced by the recovery in demand for the third consecutive month. Despite the IE’s rise, it only reflects a reduction in the entrepreneurs’ pessimism since the index remains lower. The release of funds may be helping the favorable scenario for the second quarter. However, the continuity for the medium term still depends on reductions in uncertainty, improvement in consumer confidence, and evolution of the macroeconomic variables,” said Tobler.

Despite the positive result for the month, the trade confidence level is still below the level considered neutral. Following this line, the balance of Planned Employment (composed of the proportion of business people who plan to increase their staff, discounting those who plan to reduce it) has been oscillating at the positive level but still close to the neutral level.

With information from Reuters