UPDATE 1-Brazil services activity in July rises at fastest pace this year

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BRASILIA, Sept 12 (Reuters) - Brazil’s services sector grew in July at its fastest pace this year, official figures showed on Thursday, another indication that Latin American’s largest economy started the third quarter on a solid footing.

A day after figures showed retail sales posting their biggest rise of the year in July, government statistics agency IBGE said service sector activity climbed 0.8% in the month and 1.8% on the year, both smashing forecasts.

The strong rebound, however, follows a particularly weak June, when the largest sector of Brazil’s economy shrank by its most in a year. Overall, the first seven months of 2019 show a pretty sluggish rate of expansion of just 0.8%.

Still, July’s figures were far stronger than economists had expected. The median estimate from a Reuters poll was for flat growth on the month and 0.2% growth on the year.

“The outlook for private consumption and retail/services is moderately positive,” wrote Alberto Ramos, head of Latin American research at Goldman Sachs, in a note to clients on Thursday.

Services account for more than 70% of economic activity in Brazil. Earlier this month, the IHS Markit survey of purchasing managers showed the sector expanded in August for the second month in a row, although the pace of growth slowed.

Thursday’s report is another piece of data that points to steady if unspectacular growth in the third quarter after the economy expanded by 0.4% in the second quarter.

This week, the government raised its 2019 economic growth forecast slightly to 0.85% and Economy Ministry officials said the worst for the economy is now behind it. (Reporting by Jamie McGeever Editing by Bernadette Baum)