SAO PAULO (Reuters) – Brazil’s services sector grew more than expected in February, according to data from statistics agency IBGE on Thursday, after showing signs in the prior three months of cooling amid tight monetary policy.
Services sector activity, the main driver of Latin America’s largest economy, was up 0.8% in February from the previous month, IBGE said, above the 0.1% increase expected by economists polled by Reuters.
“In February, the services sector showed widespread growth, with four out of the five activities surveyed having positive results. With this month’s advance, there was a recovery from the loss observed in January,” said Rodrigo Lobo, research manager at IBGE.
IBGE data earlier this month showed industrial output fell unexpectedly due in part to the negative impact of high interest rates. Brazil’s central bank has hiked rates to bring inflation back to its 3% target.
The benchmark interest rate stands at 14.25%, and central bank policymakers have signaled a smaller rate hike at their next meeting as they monitor signs of an economic slowdown.
Forward-looking economic indicators, however, support expectations of a robust economy in the first quarter, according to Nicolas Borsoi, chief economist at Nova Futura Investimentos.
“Going forward, we expect services activity to benefit from federal fiscal transfers to low-income households with a high propensity to consume,” Alberto Ramos, head of Latin America economic research at Goldman Sachs, said in a note.
On an annual basis, according to IBGE, services output grew 4.2% in February from February 2024, the 11th consecutive positive reading. Economists in a Reuters poll had forecast a median rise of 3.3%.
(Reporting by Isabel Teles; Editing by Paul Simao)
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