BRASILIA - Brazil’s economy probably emerged in April from its deepest recession ever as lower interest rates and hopes of sweeping economic reforms bolstered services and manufacturing activity, a private survey showed on Thursday.
The Purchasing Managers Index (PMI) for the Brazilian services sector, compiled by research firm Markit, rose to 50.3 in April from 47.7 in March. The index had remained below the 50 mark that separates contraction from expansion since February 2015.
Services account for about 60 percent of Brazil’s gross domestic product, which contracted by more than 3 percent in each of the past two years.
Markit’s Composite Index, which also takes into account a recent improvement in manufacturing activity, rose to 50.4 in April from 48.7 in March.
“It’s encouraging to see Brazil’s economy on the rise after a prolonged downturn. More so, the positive news of expanding output was balanced across the manufacturing and service sectors,” Markit economist Pollyana de Lima wrote in a note.
Lower interest rates, an expected economic rebound, higher consumption and political reforms were listed by Markit as drivers of higher confidence among service providers.
Brazil’s central bank slashed interest rates from 14.25 percent last year to 11.25 percent last month and is expected to keep cutting to 8.5 percent by December as inflation subsides.
In Congress, lawmakers are expected to approve easier labor rules and stricter limits to pension spending in coming months.
Improving activity helped service providers reduce the pace of job cuts to the slowest since August 2015, Markit added. Incoming new work grew for a third straight month.
Reporting by Silvio Cascione, Editing by Chizu Nomiyama