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UPDATE 2-Brazil's services activity shrinks in Q1 to below pre-pandemic levels

·2 min read

(Adds comments, graphic)

By Jamie McGeever

BRASILIA, May 12 (Reuters) - Services activity in Brazil fell in March for the first time in 10 months, official figures showed on Wednesday, meaning the sector shrank in the first quarter back to below pre-pandemic levels.

The figures show the effect of renewed lockdown measures to counter the deadly second wave of the COVID-19 pandemic sweeping Latin America's largest economy, and suggest gross domestic product may have contracted in the January-March period.

"They were less impactful than March 2020, but enough to make the service sector go into reverse and return it to pre-pandemic levels," said Rodrigo Lobo, research manager at government statistics agency IBGE.

The services sector shrank by a seasonally adjusted 4.0% on the month, IBGE said, more than the median estimate in a Reuters poll of economists of a 3.2% fall.

It was the first decline in activity in 10 months, IBGE said. It was the fourth largest monthly fall since the series began in 2011 and meant the sector is 2.8% smaller than it was in February of last year just before the pandemic struck.

February's rise was revised up to 4.6% from 3.7%, the third largest in the history of the series.

Services sector output in March was up a non-seasonally adjusted 4.5% from the same month last year, but down a non-seasonally adjusted 0.8% in the quarter from a year earlier.

Activity in the 12 months through March was down a non-seasonally adjusted 8.0% from the same period last year, IBGE said.

Services account for around two-thirds of all activity in Brazil's economy. The sector is 13.6% smaller than its peak in 2014.

Three of the five sub-sectors surveyed shrank in March, led by a 27% slump in services provided to households, including restaurants and hotels, IBGE said.

The services sector has been hit hard by the second wave of the pandemic. The latest survey data show that purchasing managers activity fell again in April, and Brazil's central bank said this week that services are still "struggling" to recover from last year's slump. (Reporting by Jamie McGeever; Editing by Steve Orlofsky and Paul Simao)