October 19, 2016 / 11:50 AM / in a year

UPDATE 1-Rio Olympics fails to boost Brazil services in August

(Adds details, forecast for September)

BRASILIA, Oct 19 (Reuters) - Services activity in Brazil fell more than expected in August as the Rio Olympics failed to boost growth in the country, adding to recent signs that the economy could take longer than expected to emerge from recession.

Services activity in Brazil shrank 3.9 percent in August from August 2015, statistics agency IBGE said on Wednesday. Economists had forecast a median drop of 2.7 percent in a Reuters poll.

Services activity fell 1.6 percent from July after seasonal adjustments, erasing a 0.7-percent gain in the previous month.

Services grew 2.7 percent from July in Rio de Janeiro, the host city of the 2016 Olympics. However, tourism fell 0.8 percent in the country as a whole, and a broad category of services targeted at families, which includes restaurants, dropped 1.6 percent, IBGE said.

Taken together with a second consecutive drop in retail sales and a sharp plunge in industrial output in August, the weakness in Brazil’s services suggests a two-year-long recession continued to hold course in Latin America’s largest economy despite a recent improvement in business and consumer confidence.

Services account for about 60 percent of Brazil’s gross domestic product. Economists in a global Reuters poll on Tuesday projected Brazil’s economy to resume growth on a year-on-year basis only in the first quarter of 2017.

Economists with MCM Consultores forecast services activity to fall for a second straight month in September, although at a smaller rate of 0.2 percent, they said in a note. (Reporting by Silvio Cascione; Editing by Chizu Nomiyama)

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