SAO PAULO, Aug 5 (Reuters) - Brazil’s service sector barely expanded in July as new work slowed, a closely watched business survey showed on Monday, contributing to signs Latin America’s largest economy started the second half of 2013 on the wrong foot.
HSBC’s Purchasing Managers Index for Brazilian services fell to 50.3 in July on a seasonally adjusted basis, matching a dip in March to the weakest level since August. Readings above 50.0 indicate expansion.
Fragile services growth and a drop in manufacturing resulted in the first overall PMI contraction in 11 months, raising doubts about Brazil’s fragile economic recovery.
The Composite Output Index for the country, which includes both the services sector and manufacturing data, dropped to 49.6 in July from 51.1 the month before.
Consumer confidence tumbled to a four-year low last month as Brazilians reacted to a wave of popular protests over corrupt politicians, inadequate public services and high prices.
Those demonstrations and the political uncertainty that followed appear to have stemmed the expansion of new business, according to HSBC economists.
“Activity in the service sector slowed almost to a halt last month,” said Andre Loes, chief Brazil economist with HSBC. “Growth has been very sluggish since March, with the Business Activity Index remaining at or below 51 for the entire period.”
Still, business sentiment among services companies remained upbeat about the year ahead, as the 2014 soccer World Cup, which Brazil is hosting, promised an influx of tourists on their 12-month horizon. (Reporting by Brad Haynes; editing by Andrew Hay)