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Brazil’s Services Industry Contracted: What’s Ahead?

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Brazil Services PMI in June

According to a report by Markit Economics, the final Brazil Services PMI was again in the contraction zone in June after showing some contraction in May. It was 47 in June compared to 49.5 in May. June’s figure was the weakest since November 2017.

The Brazil (EWZ) Services PMI in June was mostly due to the following factors:

  • Production volume and output declined sharply in June.
  • New business orders and export orders fell in June. Falling domestic demand mainly caused the weakness in economic activity.
  • Employment in the services sector fell in June.

Brazil’s overall business sentiment in the services sector fell in June. The transporter strike, rising inflation, and rising unemployment mainly weighed on the performance of the services sector. Outstanding business orders also declined. However, businesses are optimistic about the short-term market outlook. They expect the market condition to improve in the next 12 months after the country’s presidential elections.

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Market impact in June

The iShares MSCI Brazil Capped ETF (EWZ) and the Direxion Daily MSCI Brazil Bull 3X ETF (BRZU), which tracks the performance of Brazil’s equity market, fell drastically in June. The First Trust Brazil AlphaDEX ETF (FBZ) fell 15.57% that month.

In the next part of this series, we’ll analyze the performance of the China Manufacturing PMI in June.

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