Brazil's service sector suffers record drop in March due to coronavirus.
The Purchasing Managers' Index (PMI) survey indicates that the country's services sector plummeted to 34,5 points in March, from 50,4 in the previous month, the largest contraction in the survey's 13-year history.
Camila Moreira, Reuters - Activity in Brazil's services sector plummeted in March, suffering its biggest drop since the survey began 13 years ago, a setback attributed almost exclusively to business closures and reduced consumer demand due to measures taken to contain the coronavirus, the Purchasing Managers' Index (PMI) survey showed on Friday.
IHS Markit reported that the country's services PMI plummeted to 34,5 in March, from 50,4 the previous month, marking the sector's biggest contraction in the survey's 13-year history.
In March, there were order cancellations and business closures, a combination that resulted in the largest decline in new jobs since the survey began in March 2007.
Export sales also contracted at a rapid pace that exceeded the drop in the total volume of new business, amid the continued closure of international borders in response to the pandemic.
“The data from March illustrate that business closures, order cancellations, and a decline in consumer demand amid the Covid-19 public health emergency translated into a rapid fall in service sector output,” said Tim Moore, economics director at IHS Markit, in a statement.
Against this backdrop, service providers recorded a drop in the number of jobs at the fastest pace since October 2016, driven by the need to reduce operating expenses.
The sector also faced a sharp increase in costs in March, although the rate of input inflation was the weakest since November. The strong dollar and the increase in prices of imported items were considered the main reasons.
Thus, prices charged saw the largest increase in three months, with respondents citing the need to pass on costs, although some companies suggested that discounts were offered to help mitigate the drop in demand.
The future is uncertain, with the weakest expectations since the survey began in 2007, amid concerns that the domestic economy will take a long time to recover from the shock caused by the coronavirus.
The record contraction in the services PMI caused Brazil's Composite PMI to plummet to 37,6 in March, from 50,9 in February, also the lowest level in 13 years. The manufacturing sector also contracted during the month, but at a more modest pace.