Brazil Macro Watch: Service sector, retail sales
Fresh indicators of the Brazilian economy reinforced signs that it will perform only tepidly this year.
The service sector, which represents nearly two thirds of Latin America's largest economy, contracted 0.3% in July versus the year-ago period, according to statistics bureau IBGE.
For January-July the sector posted a contraction of 0.8%.
Earlier this week, IBGE reported that retail sales dropped 1% in July year-on-year while expanding 2.3% overall in the first seven months of the year.
"The outlook for private consumption and the services sales remains lackluster. Going forward, the services sector should be supported by the low inflation environment (which is buttressing real wage income) and moderate employment growth, but the recent deterioration of confidence indicators, the still significant slack in the labor market and more defensive spending and credit policies due heightened policy and political uncertainty will likely limit the buoyancy of private consumption and the services sector," said Alberto Ramos, an economist at Goldman Sachs.
At the start of the year, economists were predicting a GDP growth of around 3% this year, after a growth of 1% in 2017. However, with high political uncertainty affecting consumers and business confidence, now economists expect an expansion for this year more in line with that of last year.
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