Trust in services has third consecutive fall

"Contrary to what has happened in recent months, the drop reported in April was influenced by a worsening of the perception of the current moment, while the expectations indicator remained relatively stable”, assesses Rodolpho Tobler, economist at FGV IBRE.
Economics
02 May 2019
Trust in services has third consecutive fall

The Service Confidence Index (SCI) of FGV’s Brazilian Institute of Economics (IBRE) fell by 0.9 points in April, reaching 92.1 points, in the third consecutive fall in the year. In quarterly moving averages, the index fell by 2.0 points.

“The further decline in service confidence shows that the sector is still struggling at the beginning of the second quarter. Contrary to what has happened in recent months, the drop reported in April was influenced by a worsening of the perception of the current moment, while the expectations indicator remained relatively stable. In this context, the result still does not suggest a reversal of the recovery trend of the sector, but the slow pace of activity is expected to persist,” assesses Rodolpho Tobler, economist at FGV IBRE.

With the SCI drop in April, the index in the year has reported a cumulative loss of 2.5 points. This result is influenced by worsening of the assessments of the current situation. The Current Situation Index (ISA-S) declined by 2.1 points, reaching 87.2 points, the lowest level since October 2018 (86.6 points). The two items that make up the ISA-S contributed negatively in April. The current demand volume indicator decreased by 2.6 points, reaching 86.6 points, while the current business situation indicator fell by 1.5 points, reaching 87.9 points. Both returned to the lowest levels since October 2018.

In the case of the IE-S, there was relative stability considering the 0.2-point variation in the month, which increased to 97.1 points. The demand indicator expected for the next three months contributed to the positive result of the IE-S, as it increased by 0.8 points, reaching 95.7 points. In turn, the business trend indicator for the next six months decreased by 0.3 point, reaching 98.5 points.

The Installed Capacity Utilization Level (NUCI) of the Services sector fell by 1.3 percentage points, reaching 81.7%, offsetting much of the increase of the previous month (1.5).

For the third consecutive month, the indicator that measures Expected Employment fell by 1.3 points, reaching 104.9 points, reporting a cumulative loss of 5.1 points. Faced with frustration as to the direction of the economy, entrepreneurs have been calibrating their expectations and reducing their intention to hire in the coming months. In April, the percentage of companies with the intention to increase total number of employees in the following three months was 17.5%, the lowest percentage since November 2018 (17.4%).

The full study is available on the website.