Brazil’s service sector has record job creation in May, PMI shows

Brazil’s service sector posted record job creation in May, but also the sharpest price rises in more than 15 years, as activity expansion slowed, according to data from the Purchasing Managers’ Index (PMI) survey. ) from S&P Global.

The PMI slipped to 58.6 in May from 60.6 in April, remaining above the 50 mark that separates growth from contraction. Although it showed a loss of strength, this was still the second fastest rate of expansion since May 2007.

The maintenance of growth is due to the resumption of demand and events following the Covid-19 pandemic, as well as stimulus policies, according to S&P Global.

New business increased for the 13th month in May due to strong demand and new customer acquisitions, which prompted service providers to seek capacity expansion and hire new employees.

In May, the rate of job creation in the Brazilian service sector was the strongest since the survey began in March 2007.

But the month was also marked by record price increases. Input inflation showed an unprecedented pace in May, with survey respondents citing higher energy, food, fuel, labor and materials costs.

They also indicated pressure derived from the strength of the dollar and the Ukraine war. This scenario led service providers to raise prices charged again in May, with the overall inflation rate hitting a high for the third straight month.

“With prices also rising in the industrial sector, PMI results show unprecedented increases in both input costs and prices charged in the private sector,” said Pollyanna De Lima, associate director of economics at S&P Markit.

“This will be of concern to policymakers given that aggressive monetary policy tightening has so far failed to contain price pressures caused by supply chain constraints, energy price volatility and the war in Ukraine.”

Looking to the future, businesspeople showed greater optimism for the next 12 months, with the positive sentiment rate strengthening to a peak in nearly three years.

Companies cited efforts to attract new customers and investment in campaigns, with some expecting price stability.

With slower growth in services, Brazil’s Composite PMI dropped from a 14.5-year high of 58.5 hit in April to 58.0 in May. Still, the reading is the second strongest since October 2007, supported by the expansion of Brazilian industry to the highest level in eight months.