Brazil June Services Sector Flat, Beating Expectations as Information & Communications Provides Support — BigGo Finance
Brazil’s services sector activity index for June was flat month-over-month, according to data released by the Brazilian Institute of Geography and Statistics (IBGE) on the 12th. The result showed greater resilience than market expectations, as economists had forecast a 0.2% decline. The index had declined in the previous month.
On a year-over-year basis, the index rose 2.0%, also surpassing the 1.4% increase that had been forecast. Although activity declined in four of the five surveyed segments in June, growth in the information and communications sector offset the overall weakness.
| Indicator | Actual | Market Forecast |
|---|---|---|
| June Services Activity Index (MoM) | Flat (0.0%) | -0.2% |
| June Services Activity Index (YoY) | +2.0% | +1.4% |
| SELIC Policy Rate (as of Aug. 5) | 14.00% | — |
| Cumulative Rate Cuts Since March | 100bp | — |
J.P. Morgan analysts noted that the latest data was more resilient than their conventional models had suggested. They said the figures reduce downside risks to growth and support the firm’s forecast for second-quarter gross domestic product (GDP) to expand at an annualized rate of around 2%.
The Central Bank of Brazil cut its policy rate by 25 basis points (bp) for the fourth consecutive meeting this month, bringing it to 14.00%. This marked the fourth straight rate cut. The central bank has left its forward guidance on future monetary policy open-ended, and the resilience of the services sector will be a key focus for how it affects the pace of additional easing.
Trajectory of the Rate-Cut Cycle
The Central Bank of Brazil’s Monetary Policy Committee (Copom) began cutting the benchmark SELIC rate from 15.00% in March 2026 and has since implemented 25bp cuts at each meeting. According to Bloomberg reports, the rate moved from 15.00% in March to 14.75%, then 14.50%, then 14.25% in June, before the committee unanimously decided on Aug. 5 to lower it to 14.00%, bringing the cumulative rate cuts since March to 100bp. In its statement, the committee cited a gradual economic slowdown and moderating inflation as the rationale for the cuts, while also acknowledging that price pressures remain above target levels.
▲ Copom has cut rates by 25bp at each of four consecutive meetings since starting from 15.00% in March 2026, reaching 14.00% on Aug. 5.
Sector Breakdown
Activity contracted in four of the five segments in June. Only the information and communications sector expanded, offsetting the declines in other segments. A detailed breakdown by segment was not released, but the strength in information and communications underpinned the overall services sector.
Implications for the Economy and Monetary Policy
The services sector accounts for roughly 70% of Brazil’s economy, making it a key sector whose trajectory influences GDP. With June services activity beating market expectations, market views on second-quarter growth could firm somewhat.
Meanwhile, the central bank is proceeding with rate cuts while balancing inflation control and economic support. The resilience of the services sector indicates sustained domestic demand, but it also suggests that inflationary pressure through services prices could persist, making it a key factor for the central bank to monitor.
Following the latest data, J.P. Morgan maintained its view that second-quarter GDP will expand at an annualized rate of around 2%. As Brazil’s economy follows a gradual recovery trajectory, services sector trends will continue to draw attention as a key economic indicator.