Brazil services recover in February as costs spike -PMI

SAO PAULO, March 5 Wed Mar 5, 2014 8:00am EST

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SAO PAULO, March 5 (Reuters) - Activity in Brazil's services sector rebounded in February from a January slump, a business survey showed on Wednesday, as preparations for the World Cup drove order growth and pushed up costs at the fastest pace in three years.

HSBC's Purchasing Managers Index for Brazilian services rose on a seasonally adjusted basis to 50.8 in February, recovering from 49.6 in January. A reading above 50 indicates growth.

As a result, HSBC's Composite Index for the country, incorporating meager manufacturing activity, rose to 50.8 in February from 49.9 in January.

The return to growth helped ease concern about a stagnant start to the year, which has put pressure on President Dilma Rousseff as she prepares to run for re-election in October.

Still, economic expansion remains slight as tighter credit and stubborn price pressures continue to limit the chances of a more robust Brazilian recovery.

"Although the PMI report suggests that the economy strengthened in February, we think it is far too early to celebrate an improvement in economic conditions," said Andre Loes, chief economist for HSBC in Brazil.

Anecdotal evidence suggested preparations for the soccer World Cup, which Brazil is hosting in June and July this year, helped drive strong demand as well as soaring prices in the services sector.

Cost inflation for Brazilian service providers accelerated in February to the sharpest increase in three years, driven by the fastest rise ever recorded at hotels and restaurants.

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