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Brazil Services Sector Shrinks At Record Pace On Covid-19 Disruption

Brazil's service sector shrunk at the fastest pace in the survey's 13-year history in March as businesses were shut and demand shrunk due to the coronavirus, or Covid-19, outbreak, survey data from IHS Markit showed on Friday.

The headline seasonally adjusted IHS Markit Brazil Services Business Activity Index plummeted by nearly 16 points to 34.5 from 50.4 in February. A reading below 50 suggests contraction in activity.

New work fell at the fastest pace since the survey began in March 2007, thanks to cancelled orders and business shutdowns. Export demand dropped at a rapid rate that exceeded the fall in total demand, mainly due to containment measures adopted globally to slow the spread of the Covid-19 pandemic.

Employment fell at the fastest rate since October 2016, as businesses shed jobs in a bid to reduce operating costs amid shutdowns.

Average costs increased sharply in March, but the overall rate of input price inflation was the slowest since last November. A strong US dollar and a corresponding increase in the price of imported items, pushed up purchasing costs. Charge inflation remained modest, but was the fastest in three months.

Business confidence eroded sharply with expectations being the weakest since the survey began in March 2007. Firms are concerned that the domestic economy will take a long time to recover from the severe shock caused by the coronavirus pandemic.

The Composite PMI slumped to 37.6 in March from 50.9 in February, marking its lowest level since the series began in March 2007. The decline was mainly driven by the survey-record drop in service sector output. The Manufacturing PMI fell at a relatively modest pace to 47.7.

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