Brazil
services extend slump in December as cost pressures
weigh: PMI
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[January 06, 2015]
SAO PAULO, (Reuters) - Activity in
Brazil's services sector fell for the third straight month in December,
hurt by a weaker currency and a widening corruption scandal at state-run
oil company Petrobras.
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HSBC's Purchasing Managers Index for Brazilian Services edged up on
a seasonally adjusted basis to 49.1 in December from 48.5 in
November, but remained below 50 indicating further contraction.
The continuing slump in the services sector combined with a mild
recovery in manufacturing activity to lift HSBC's Composite Index
for the country to 49.2 in December, up from a more than five-year
low of 48.1 in November.
The weak leading indicator underscores the fragile economy
confronting President Dilma Rousseff as she starts a second term,
struggling to fix government finances, spur growth and keep a lid on
consumer inflation.
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A corruption investigation at Brazil's state-run oil company,
Petroleo Brasileiro SA, began to weigh on the wider economy,
according to some respondents, as the company known as Petrobras
froze some contracts with engineering firms implicated in an alleged
bribery scandal.
The HSBC survey also suggested unrelenting price pressures despite
the weak economic activity.
Brazil's currency, the real, hit its weakest level in nearly a
decade last month, pushing up the cost of imported materials and
forcing service providers to raise prices.
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"What calls our attention is that firms reported that prices charged
rose at the fastest pace since the beginning of the series, while
input prices rose at the fastest pace since 2008," said Andre Loes,
HSBC's chief economist for Brazil. "This seems inconsistent with the
overall weakness of the economy."
(Reporting by Brad Haynes; Editing by Meredith Mazzilli)
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