The average pace of growth in the second quarter, however, was slower than the prior three-month period, a consequence of the second wave of the COVID-19 pandemic.
The median forecast for 2021 inflation from more than 100 economists in the central bank's weekly FOCUS survey jumped to 5.8% from 5.4%, more than two percentage points above the bank's year-end goal of 3.75% and well above the 5.25% upper limit of its wider range.
The 0.8% monthly rate of inflation was also the highest for any May since 1996, statistics agency IBGE said, adding that all nine categories surveyed showed rising prices in the month.
The monthly rate rose from 0.3% in April, IBGE said, again more than the 0.7% rise economists in the Reuters poll had forecast.
The Getulio Vargas Foundation's (FGV) services sector confidence index rose 6.4 points to 88.1 points in May, the second consecutive rise and the highest since the pre-pandemic levels of February last year.
"An expanded vaccination program will extend the recovery in a sector that was hit hard during the pandemic," he said.
The services sector shrank by a seasonally adjusted 4.0% on the month, government statistics agency IBGE said, more than the median estimate in a Reuters poll of economists of a 3.2% fall.
It was the first decline in activity in 10 months, IBGE said, and meant the sector is 2.8% smaller than it was in February last year just before the pandemic struck.
The seasonally adjusted monthly decline of 0.6% in March was far less than the median forecast of a 7.0% decline in a Reuters poll of economists, while the year-on-year rise of 2.4% was stronger than the 1.7% fall forecast in the poll.
Some 26% of firms across the country surveyed by IBGE said the COVID-19 pandemic affected sales in March, the highest percentage since July last year.
The amount of outstanding loans in Brazil rose 0.7% in the month to 4 trillion reais ($693 billion) and over the last 12 months loan growth accelerated 16.1%, the central bank said.
The Fundacao Getulio Vargas's national industrial confidence index for March fell 3.7 points to a seasonally adjusted 104.2 from 107.9 in February.
The central bank on Thursday revised up its 2021 outlook for the sector in its quarterly inflation report. It now expects industrial production to grow 6.4% this year, up from 5.1% in its last report.
The 0.2% monthly fall was slightly less than the 0.3% decline forecast in a Reuters poll of economists, and the 0.3% fall compared with the same month a year earlier was slightly more than the 0.25% fall forecast in the poll.
January's figures followed a 6.2% slump in retail sales in December, the second biggest fall on record.
The US dollar strengthened about 2% against the real, sending the Brazilian currency to a three-month low despite a central bank auction selling $1 billion in the spot market.
The benchmark Bovespa equities index fell as much 2.7% in morning trade, with all but one of its constituent companies in the red, before paring losses to 1.3% by midday.