Brazil services activity grows 5% in June, first rise in five months

By Jamie McGeever

BRASILIA, Aug 13 (Reuters) - Services activity in Brazil rose in June, figures showed on Thursday, the first increase in five months as the sector slowly recovers from a record slump triggered by the social isolation measures put in place to combat the COVID-19 outbreak.

The 5.0% rise in service sector activity according to government statistics agency IBGE indicates the economy is pulling out of the crisis, but activity remains significantly below pre-crisis levels and the pace of recovery is slow.

Of the 166 specific segments surveyed, restaurants was one of the biggest drivers as social isolation measures relaxed.

"With the increasing movement of people in Brazilian cities, (restaurants) started opening and revenue grew again, impacting the volume of services in June," IBGE survey manager Rodrigo Lobo said.

Activity rose 5.0% in June from May, slightly more than the 4.4% rise forecast in a Reuters poll of economists, and was the second largest monthly rise since IBGE first compiled the index in 2011.

On a year-on-year basis, services sector activity fell 12.1% in June, IBGE said, less than the 14.2% fall forecast in a Reuters poll.

The figures mean that in the first six months of the year, services sector activity in Latin America's largest economy fell 8.3% from the same period in 2019, IBGE said.

All five sectors surveyed by IBGE showed increases in activity from the previous month. Transport and transport-related services rose 6.9%, and information and communications services rose 3.3%, IBGE said.

Services account for around 70% of Brazilian economic activity. While industry and manufacturing have rebounded more strongly from the crisis lows, various indicators show services struggling much more.

IHS Markit's services purchasing managers index showed the sector continued to shrink and shed jobs into July.

As the IBGE chart below shows, the level of service sector activity is still 14.5% lower than February, before the COVID-19 pandemic hit, and 24% lower than the peak in November 2014.

(Reporting by Jamie McGeever Editing by Nick Zieminski and Jonathan Oatis)

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