Services sector advances 1.1% in July, the 4th increase in a row, and reaches the highest level in five years | Economy

The volume of services provided in Brazil advanced 1.1% in July, compared to June, point out the data released this Tuesday (14) by the Brazilian Institute of Geography and Statistics (IBGE). It was the 4th consecutive monthly increase, which led the sector to reach its highest level in 5 years.

“With that, the sector is 3.9% above the pre-pandemic level in February 2020, and also reaches the highest level since March 2016. Even with the advance, the sector is still 7.7% below the historical record, reached in November 2014”, informed the IBGE.

In relation to July 2020, the sector registered an increase of 17.8%, the fifth positive rate followed on this basis of comparison. In the year, the advance is 10.7% and 2.9% in 12 months.

The services sector registers fourth consecutive high in July — Photo: Economy/G1

The service sector is what has the greatest weight in the Brazilian economy. He was the most affected by the pandemic, given the operating restrictions imposed on establishments, especially those with face-to-face service.

Between March and May 2020, the first three months of the health crisis, the service sector accumulated a loss of 18.6%. Since June of that year, however, he has been on a path of recovery.

“In this whole period [entre junho de 2020 e julho de 2021], the service sector accumulated a gain of 27.6%. Of the 14 seasonally adjusted rates [mês contra mês imediatamente anterior], only one was negative”, highlighted the research manager, Rodrigo Lobo.

According to the researcher, the resumption of the sector has been favored by the advance of vaccination and the relaxation of restrictions on the sector’s operation.

This is evidenced by the indicator accumulated in 12 months, which started its recovery trajectory in February and jumped from 0.4% in June to 2.9% in July, as shown in the chart below:

The indicator accumulated in 12 months jumped from June to July — Photo: Economy/G1

High only in 2 of the 5 major activities

The IBGE highlighted that the rise in the sector in July was sustained by only two of the five activities, in particular, by services provided to families (3.8%).

Professional, administrative and complementary services increased by 0.6% and surpassed, for the first time, the pre-pandemic level, being 0.5% above February 2020.

“These two activities are precisely those that lost the most in the most acute months of the pandemic. These are activities with services of a face-to-face nature that gradually come with the flexibility and advancement of vaccination, trying to recover the loss caused between March and May of last year”, explains the research analyst, Rodrigo Lobo.

On the other hand, there was a decrease in the volume of information and communication services (-0.4%), transport, auxiliary services to transport and mail (-0.2%) and other services (-0.5%).

“The activity that exerted the most negative pressure was information and communication services. The segments of telecommunications and information technology services had positive rates, but there was very significant pressure from the audiovisual, publishing and news agencies, which dropped 11.6% from June to July”, highlighted the researcher.

See below the variation, compared to June, of the subgroups of each major activity:

  • Services provided to families: 3.8%
  • Accommodation and food services: 4.4%
  • Other services provided to families: 0.9%
  • Information and communication services: -0.4%
  • Information and Communication Technology (ICT) Services: 0.4%
  • Telecommunications: 1.0%
  • Information Technology Services: 1.2%
  • Audiovisual, publishing and news agency services: -11.6%
  • Professional, administrative and complementary services: 0.6%
  • Technical and professional services: 4.4%
  • Administrative and complementary services: -0.6%
  • Transport, auxiliary services to transport and mail: -0.2%
  • Land transport: -0.2%
  • Waterway transport: 4.4%
  • Air transport: -7.8%
  • Storage, auxiliary services to transport and mail: -0.2%
  • Other services: -0.5%

Non-face-to-face services support the sector’s recovery

The survey manager pointed out that, although face-to-face activities have grown in July, it is the off-site activities that have been sustaining the sector’s recovery.

“With the advance of vaccination and greater flexibility in economic activities, face-to-face services continue to advance, but still at a lower rate than in February 2020. What sustains the service sector at a level slightly below March 2016 are non-attendance services, such as information technology services, financial services, and storage, auxiliary services to transport and mail, which obtained more expressive revenue gains”, pointed out Lobo.

The researcher explained that among the financial services are the securities brokerages and the stock exchange. Storage includes port and terminal management services. Among the auxiliary services to transport and mail are maritime support navigation services, such as tugboats for oil platforms and maritime agency activities.

Services provided to families remain below the pre-Covid level

In services provided to families, the advance was driven by the performance of the segments of hotels, restaurants, catering services and theme parks, which usually grow in July due to school holidays.

Despite the advance in July, services provided to families still operate 23.2% below the level of February 2020, according to the IBGE. This is the only one of the five activities that has not yet surpassed the pre-pandemic level. Among the 12 subgroups of the five major activities, half the losses recorded since the beginning of the health crisis.

“This is understandable since this is the activity in which there is the greatest concentration of services provided in person. It is an activity that deals with supply restrictions. Some establishments have closed and others have reopened, but they are not yet operating at full capacity. On the demand side, there is pressure due to the lack of advance in the mass of household income and the high level of unemployment, which prevent this service from growing in the same way as the others calculated within the sector”, explained the research manager.

Lobo emphasized that the activities with the most expressive performance are those of services provided to companies, not to individuals, that is, to families.

They are those of information technology services, technical-professionals, waterway transport and storage, auxiliary transport and mail.

The five major activities in the service sector have recovered their pre-pandemic level. — Photo: Economy/G1

Discharge in 15 of the 27 Federation Units

The volume of services grew in 15 of the 27 units of the federation from June to July. The most relevant increases came from São Paulo (1.4%), followed by Rio Grande do Sul (3.4%), Minas Gerais (1.2%), Pernambuco (4.1%) and Paraná (1.5 %). The main fall was registered in Rio de Janeiro (-4.4%).

Tourist activities have 3rd high in a row

The index of tourist activities rose 0.5%, the third consecutive positive rate. The segment, however, still needs to grow 32.7% to return to the pre-pandemic level

Eight of the 12 regions surveyed had progress, with highlights for Pernambuco (9.5%), Santa Catarina (9.4%), Bahia (6.1%) and Rio de Janeiro (2.1%).

Last week, the IBGE showed that retail sales grew 1.2% in July, the fourth consecutive monthly increase.

The recovery of the services sector and the economy, however, is uneven, with activities of a more in-person nature without yet having managed to resume full operation.

In a scenario of increased uncertainty and worsening expectations due to political tension, the worsening of the water crisis and almost double-digit inflation in 12 months, the financial market has revised downwards its projections for the Brazilian economy.

For the Gross Domestic Product (GDP), analysts reduced the high estimate for 2021, from 5.15% to 5.04%. For 2022, the projection of economic growth dropped from 1.93% to 1.72%, according to the latest Focus survey by the Central Bank.

  • Institutional crisis caused by Bolsonaro hinders economic recovery; understand

The financial market rises to 8% the inflation estimate in 2021 and sees a lower rise in GDP

The financial market rises to 8% the inflation estimate in 2021 and sees a lower rise in GDP