October 11, 2019 / 1:03 PM / 3 days ago

Brazil services activity shrinks in August, underscores sluggish economy

BRASILIA (Reuters) - Brazil’s services sector activity fell in August more steeply than economists expected, official figures on Friday showed, providing another indication that the broader economic recovery remains sluggish and uneven.

The 0.2% fall from July and 1.4% decline from the same period a year ago follows other August data releases that show retail sales barely rose and the service sector purchasing managers index (PMI) slipped from July.

Services account for over 70% of Brazil’s economy, the largest in Latin America. It shrank 0.2% in the first quarter of the year but rebounded 0.4% in the second, raising hopes that growth would consolidate around that pace in the third quarter.

But the decline in services activity in August was greater than the 0.1% monthly decline and 1.0% year-on-year fall economists had expected, according to the median estimate in a Reuters poll of economists.

The monthly fall was the fifth out of eight this year, and the annual decline was the fourth, figures from government statistics agency IBGE show.

Service sector activity in the 12 months to August rose 0.6%, IBGE said, marking a slowdown from 0.7% in the year to June and 0.9% in the year to July. Year-to-date growth slowed to 0.5% from 0.8% in July.

Brazil’s economy is expected to grow by less than 1.0% this year, according to estimates from the government, central bank and most private sector economists. Low growth and weak inflation are likely to prompt further cuts in official interest rates to new lows this year.

Reporting by Jamie McGeever; Editing by Andrea Ricci

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