Services sector grows 1.1% in July and reaches the highest level since March 2016 – 09/14/2021 – Market

Stimulated by lesser restrictions on activities, the volume of the service sector in the country increased by 1.1% in July, compared to June. The result was released this Tuesday (14) by the IBGE (Brazilian Institute of Geography and Statistics).

With the performance, the service sector is 3.9% above the pre-pandemic level of February 2020. It also reached the highest level since March 2016. ​However, it is still 7.7% below the historical record, achieved in November 2014.

Between January and July 2021, the sector accumulated an increase of 10.7%. In a longer period of 12 months, there was an increase of 2.9%.

THE increase of 1.1% in July was accompanied by two of the five activities investigated. Services provided to families rose by 3.8%, accumulating a gain of 38.4% between April and July, while professional, administrative and complementary services increased by 0.6%, with growth of 4.3% in the last three months.

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

According to the IBGE, in services provided to families, the highlight in July was the performance of the segments of hotels, restaurants, catering services and theme parks, which tend to grow in the month due to school holidays. In professional, administrative and complementary services, the highlight was legal activities, engineering services and electronic payment solutions.

In July, the three subsectors that had lows were information and communication services (-0.4%), transport, auxiliary services to transport and mail (-0.2%) and other services (-0.5%).

Even with the advance in the seventh month of the year, services provided to families still operate 23.2% below the level of February 2020. It is the only one of the five activities that has not yet surpassed the pre-pandemic level.

The IBGE also informed that, in relation to July 2020, the volume of services increased by 17.8%. Analysts consulted by Bloomberg agency projected an increase of 18% on this basis of comparison.​

Throughout the pandemic, the provision of various services was quite impaired in the country. This happened because the sector gathers activities that depend on the circulation of customers, direct contact and agglomerations. Hotels, bars, restaurants and events are part of this list.

Services linked to the area of ​​technology and information, in turn, were encouraged by social isolation to curb the coronavirus.

Now, with the vaccination against Covid-19 and the reopening of the economy, activities that need direct contact with customers are betting on an improvement in business. Factors such as unemployment and rising inflation, on the other hand, challenge the consistent recovery of these segments.

“The service sector is not exclusively aimed at families. It is possible to offer services to families, businesses and government. Inflation and unemployment are in fact impediments for companies that provide services to families. Families in general have budget restrictions, but those with low income, proportionally, consume less services than those of the middle and upper classes”, pondered Lobo.

In a report, Banco Original stated that the sector’s increase of 1.1% in July was in line with market expectations. “The result reinforced the signs of advance of economic activity in the third quarter of the year and especially the message of recovery in the sector amid the reopening of economic activities and the advance of vaccination against Covid-19 in the country”, amended the bank.

Goldman Sachs has also linked the industry’s rise to issues such as increased mobility and advancing immunization. However, the institution cited risks for the coming months, which include the acceleration of inflation, higher interest rates and noise and uncertainty in the political area.

In addition to presenting the performance of services, the IBGE has also released the balances of two other sector indicators for July: industrial production and trade sales.

As the institute, the production of factories fell 1.3% compared to June. Trade rose 1.2%.