Brazil’s Services Confidence Index (ICS), calculated by FGV’s Brazilian Institute of Economics (IBRE), grew by 0.3 points in August, up to 83.2 points.  After the second consecutive increase, the index recovered only half of the loss of 2.8 points seen in June.

“The slight improvement in the perception of service companies in August was once again supported by expectations, while current assessments do not show any signs of consistent recovery. The drop recorded in August in the expected employment indicator, which had been showing signs of improvement in the last three months, points towards a scenario of sluggish recovery in the sector,” said Silvio Sales, consultant from FGV’s Brazilian Institute of Economics (IBRE).

There was an increase in confidence in seven of the 13 main activities surveyed. The slightly positive performance in August resulted from a combination between improved expectations and the worse current situation. The Expectations Index (IE-S) rose 0.9 point while the Current Situation Index (ISA-S) fell 0.3 point.

Demand forecasts in the next three months were the greatest contributing factor to the increase in the IE-S in August. The expected demand indicator increased by 1.0 point, up to 86.8 points. Among the indicators that make up the ISA-S, the largest negative influence came from the one that measures the volume of current demand, which fell 0.3 point, totaling 78.5 points.

The NUCI of the services sector remained stable in August, fixed at 82.1%, after reaching its historical low in June (81.5%).

Politics vs. Confidence

Every month, a question of the Survey seeks to identify the factors that are limiting the improvement of the business environment. In this question, a space is reserved for companies to describe factors they consider important and that are not listed among the answer options offered in the questionnaire.

There is a certain consensus that the unstable political environment is increasing uncertainty and slowing the investment and consumption decisions of economic agents.

“It is reasonable to assume that the continued reduction of the tension in the political environment will contribute to maintaining the positive trend in the confidence index in the coming months”, said Silvio Sales.

The August 2017 edition collected data from 2034 companies between August 1 and 25. The next Services Survey results will be published on September 29, 2017.

Go to the website to read the complete study, available in Portuguese.