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Brazil services sector up for 2nd straight month on transportation growth

By Gabriel Araujo and Camila Moreira

SAO PAULO, Aug 11 (Reuters) - Services activity in Brazil rose for the second month in a row in June, coming in slightly ahead of market expectations, boosted mainly by the transportation sector, statistics agency IBGE said on Thursday.

Services grew 0.7% in June from May, according to seasonally adjusted data, while economists polled by Reuters had expected a 0.5% increase.

When compared with the same month a year ago, services were up 6.3%, also above the forecasted 6.1% boost.

Regaining pace after the pandemic-related downturn, the services sector accounts for about 70% of all activity in Latin America's largest economy.

Gustavo Cruz, a strategist at RB Investimentos, said Thursday's data highlighted people were choosing to spend more on services than on goods, after June's retail sales, released this week, showed a deeper-than-expected 1.4% drop.

"There is a clear preference for services over retail," Cruz said, noting the boost provided by a string of government economic stimulus, including releasing money from severance funds.

IBGE said transportation services were the biggest sector contributor in June, rising 0.6% from the previous month and 9.8% on a yearly basis due to higher freight revenues.

Brazil's services activity is now 7.5% above pre-pandemic levels in February 2020, though still 3.2% below its peak in November 2014.

Nonetheless, JPMorgan economists noted that despite widespread strength across surveyed areas in June, services to families (such as food and housing) remained below pre-pandemic levels and there was still space for additional recovery.

In the second quarter, services activity rose 1.1% over the previous three months. It was the eighth consecutive quarterly increase, but at the slowest pace of the series. (Reporting by Gabriel Araujo and Camila Moreira Editing by Raissa Kasolowsky, Christian Plumb and Jane Merriman)

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