Business activity in Brazil rises slower as inflation intensifies: Report

By Ovunc Kutlu

ISTANBUL (AA) - Business activity in Brazil rose in August at a softer rate as inflationary pressures have intensified, according to a report released Wednesday by the US-based financial services company S&P Global.

The S&P Global PMI Brazil Services Business Activity Index stood at 54.2 in August, down 2.2 points from 56.4 in July, but managed to come in above the neutral mark of 50.0.

The index signaled a softening of demand conditions, which in turn restricted growth of business activity, said the report.

It noted that depreciation in Brazilian Real, droughts in parts of the country, and the lasting effect of flooding in Rio Grande do Sul pushed cost pressures to their highest level in over two years.

As a result, there was a sharper increase in selling prices, it added.

"The decline in momentum observed among service providers in August does not raise immediate concerns, as growth rates continue to be historically robust," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. "Additionally, an uptick in job creation and strong business confidence indicate that this slowdown may be temporary."

"That said, high borrowing costs and rising price pressures could take a toll on consumer spending and business investment. Services companies saw the slowest uptick in new work for seven months, while business confidence slipped which could lead some firms to put the brakes on hiring," she added.