Brazil services grow at fastest pace in nearly one year in Jan

Tue Feb 5, 2013 6:59am EST

Related Topics

* HSBC Brazil Services PMI at 54.5 in January

* Composite PMI rises to 54.9 from 53.2 in Dec

By Silvio Cascione

SAO PAULO, Feb 5 (Reuters) - Activity in Brazil's services sector expanded at its fastest pace in nearly one year in January, a private survey showed on Tuesday, fueling hopes of an economic recovery this year.

HSBC's Purchasing Managers Index (PMI) for the Brazilian services sector rose to 54.5 in January from 53.5 in December on a seasonally adjusted basis.

That was the highest reading for the indicator since February, and it was the fifth straight month the index stood above the 50 mark that divides expansion from contraction.

The Composite Output Index accelerated to 54.9 from 53.2 in January, HSBC said. The composite index includes both the services sector and manufacturing data, which was released last Friday.

"As expected, the economy appears to have entered 2013 experiencing a modest recovery," said Andre Loes, chief Brazil economist at HSBC.

The services sector has been one of Brazil's main growth sources driven largely by the movement of more than 30 million people into the middle class over the past decade. However, it disappointed in the third quarter due to weaker banking activity.

In 2013, Brazil is expected to grow 3.1 percent, according to a weekly central bank poll of economists, following tens of billions of dollars in stimulus measures by President Dilma Rousseff's government. That would be around three times faster than last year's frustrating performance.

Output rose at the fastest pace in 11 months, and new orders increased for the fifth straight month, according to Markit, who compiled the PMI data for HSBC.

Services companies also added jobs in January, though at the slowest pace in five months. Brazil's unemployment rate fell to a record low of 4.6 percent in December, according to official data released last week. {ID:nL1N0B01T5]

Companies also reported rising input and output costs in January, adding to concerns about inflation. Services prices rose more than 8 percent last year, far above the headline inflation rate of 5.8 percent.

The main reasons behind the rise in input costs were higher raw material costs and unfavorable exchange rate conditions, according to the PMI survey.

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