Reuters: US Dollar Report: Brazil services slip in August, cut jobs for 1st time since 2009

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Brazil services slip in August, cut jobs for 1st time since 2009 Sep 5th 2012, 13:00 Wed Sep 5, 2012 9:00am EDT * HSBC August Services PMI at 48.1, from 48.9 in July * August Services PMI lowest since May 2009 * Composite PMI down to 48.6, from 48.9 in July * Composite PMI lowest in 11 months By Silvio Cascione SAO PAULO, Sept 5 (Reuters) - Activity in Brazil's services sector contracted in August for the second month as it cut jobs for the first time since 2009, dimming one of the few economic bright spots which had helped the country skirt recession. HSBC's Purchasing Managers Index (PMI) for the Brazilian services sector fell to a seasonally adjusted 48.1 in August from 48.9 the previous month, below the 50 mark hat divides expansion from contraction. That August reading was the lowest since May 2009 in the sector which HSBC said accounts for about two-thirds of economic activity. The survey also showed employers in the service sector cut jobs for the first since July 2009. Brazilian services providers' stellar growth in the past few years helped offset a deep crisis in manufacturing. A boom in service jobs has kept the unemployment low but the latest PMI data raised questions if that would still hold. "This is something we will want to monitor very closely, as the private service sector accounts for around 60 percent of the job market, which so far, had shown remarkable resilience to the economic downturn," said Andre Loes, chief economist in Brazil at HSBC. Business activity fell in all six service sectors in August, said research firm Markit, which compiled the data for HSBC. The PMI data raise doubts about whether a meaningful economic recovery is taking root in Brazil. They also pose new challenges for President Dilma Rousseff, whose government has been focusing efforts on reviving Brazil's ailing manufacturing sector. "The poor performance of the Services PMI so far this quarter is a cause for discomfort, as most analysts (including ourselves) expect growth to rebound in the third quarter," Loes added. COMPOSITE PMI AT LOWEST IN NEARLY A YEAR Combined with the fifth contraction in a row in manufacturing in August, the services data pushed the HSBC Brazil Composite Output Index down to 48.6 in August from 48.9 in July -- the lowest reading in 11 months. Some recent data had suggested Brazil was on track for a recovery, albeit very slowly, after flirting with recession for much of the past year. A battery of tax breaks helped spur purchases of cars and home appliances, while companies increased hiring in July, according to payroll data, keeping unemployment near record lows. After sweeping government stimulus, including a deep cut in benchmark interest rates to a record low of 7.5 percent, the economy is expected to rebound next year to expand by 4 percent, up from a meager 1.6 percent growth expected for this year, according to the latest central bank survey of analysts. But the HSBC survey revealed worrying cracks in what has been Brazil's leading job generator. Employment fell in all segments of the services sector surveyed, except for post and telecommunications, which reported a meager rise from July. Brazil, Latin America's largest economy, is home to nearly 200 million people. More than 30 million were lifted out of poverty in the past decade and formed a large consumer market for goods and services as the country benefited from China's huge appetite for raw materials like iron ore and soy. The HSBC PMI services sector data sent conflicting signals on inflationary pressures. Input costs slowed, rising less than the series average. However, average selling prices charged by firms increased in August at the same pace seen in July. The headline PMI index, which was 48.1 in August, is based on a single question asking service providers about the change in business activity compared to the previous month. The lower it is from 50, the faster the pace of contraction is. Link this Share this Digg this Email Reprints

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