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SAO PAULO, Jan 15 (Reuters) - The Brazilian services sector experienced a larger-than-expected decline in November, according to the IBGE statistics agency on Wednesday, indicating that the local economy may be cooling due to stringent financial conditions.

IBGE reported that service sector activity, a key driver of Brazil's economy, decreased by 0.9% in November compared to the previous month, marking the largest monthly drop since April 2023.

Economists surveyed by Reuters had anticipated a 0.3% decrease.

Despite the sector's positive performance throughout 2024, which contributed to a positive surprise in Brazil's gross domestic product (GDP) last year, the economy is expected to face growth constraints due to high borrowing costs.

In an effort to bring inflation back to its 3% target, the local central bank has been raising interest rates following a period of robust activity, a tight labor market, fiscal uncertainties, and currency devaluation that pushed up consumer prices and expectations.

"The service data indicates a slowdown. The scenario should remain restrictive for activity," noted Rafaela Vitoria, chief economist at lender Inter.

Previous IBGE data had already shown negative figures for retail sales in November.

The decline in monthly services was primarily influenced by decreases in transportation (-2.7%) and professional services (-2.6%).

Furthermore, the IBGE disclosed that on a year-over-year basis, Brazil's service sector expanded by 2.9% in November, falling short of economists' median forecast of 3.4% growth in a Reuters poll.