Activity in Brazil's services sector plunged faster in June, contracting at the quickest pace in over six years, a private survey showed on Friday, underscoring the depth of a likely recession and the meager chances for a recovery this year. HSBC's Purchasing Managers Index (PMI) for Brazilian Services fell on a seasonally adjusted basis to 39.9 in June from 42.5 in May, the second-lowest reading in the history of the index. The 50 mark of the index separates contraction from expansion.
The accelerating contraction, coupled with the ongoing deterioration of manufacturing output, dragged HSBC's Composite Index for the country to 41.0 in June from 42.9 in May. It was the worst reading since March 2009 for both indices. Mounting evidence of a sharper downturn in recent months has sapped hopes of an economic rebound by the end of the year and added to a chorus of discontent over President Dilma Rousseff's austerity agenda.
"Prospects for the Brazilian service sector remain gloomy approaching the second semester, with rising prices, high interest rates and muted demand making it difficult to see a light at the end of the tunnel," wrote Pollyanna De Lima, an economist with Markit. Faced with soaring inflation and stiff competition, service providers slashed deeper into payrolls in an attempt to recover profitability, accelerating job cuts to the fastest pace since early 2009.
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