Service sector has a high of 10.9% in 2021 and exceeds 2020 losses, says IBGE

After suffering a record drop of 7.8% in 2020, the volume of the service sector grew again in Brazil, with an increase of 10.9% in 2021, informed this Thursday (10) the IBGE (Brazilian Institute of Geography and Statistic). In percentage terms, the increase is the largest in the historical series, which began in 2012.

According to Rodrigo Lobo, manager of the IBGE survey, the double-digit rise is largely explained by the weakened comparison base, since the sector was the most impacted in 2020 by the arrival of the pandemic, in comparison with industry and commerce.

In the researcher’s assessment, this ended up causing a kind of delay in the recovery of losses in the sector, which occurred in 2021.

“The service sector was most impacted by the beginning of the pandemic due to the face-to-face nature of some activities”, he said. “The basis of comparison is quite depressed,” he added.

On a monthly basis, the volume of the sector grew by 1.4% in December, compared to November. The data far exceeded the financial market expectations. Analysts consulted by the Bloomberg agency projected an increase of 0.6%.

With the December result, the segment was 6.6% above the pre-pandemic level, recorded in February 2020. It also reached the highest level since August 2015. However, it is still 5.6% below the series record, registered in November 2014.

The service sector involves a wide variety of businesses, from bars and restaurants to financial, technology and educational institutions. It is also the main employer in the country.​

IBGE data still indicate an uneven pace of recovery among service activities. Three of the five surveyed are above pre-crisis, while another two are below February 2020.

According to Lobo, what took the sector as a whole to a higher level than the pre-coronavirus was mainly the positive impact of activities that depend less on the circulation of customers and that are aimed to a large extent at companies.

Among them are information and communication services, which are at a level 12.8% above the pre-crisis level. This activity involves telecommunications, information technology, audiovisual services, publishing and news agencies.

The IBGE analyst explained that face-to-face services also showed a resumption throughout 2021, in a context of advancing vaccination against Covid-19 and fewer restrictions on companies. This reaction, however, is still incomplete.

Services provided to families, for example, grew 0.9% in December, the ninth positive rate in a row. Despite the improvement, they are still 11.2% below the pre-pandemic level and 21.8% far from the highest point in the series, verified in October 2013. Services provided to families bring together companies such as bars, hotels and restaurants.

“This was the activity that felt the greatest effects of the pandemic, it lost a lot of revenue in the initial months, but since then it has been reducing its losses”, indicated the IBGE researcher.

Lower income threatens backlash

According to Lobo, the recovery of services may be threatened in 2022 by factors such as difficulties in employment and income, which reduce the purchasing power of consumers.

“At some point, this will make a difference. If it is already doing so, I don’t know. And if there is any sector that can suffer the impact of these variables in a more incisive way, it is the services provided to families”, he said.

In this sense, he recalled that, in times of tight pockets, families tend to favor expenses considered essential, such as food at home and electricity. Thus, there may be less money left for “superfluous” spending, said the analyst.

In relation to December 2020, the service sector as a whole grew 10.4% in the last month of 2021, according to the IBGE. Analysts consulted by Bloomberg estimated a smaller increase in this cut, of 9.1%.

Five activities go up in the year

According to the IBGE, the 10.9% growth in the sector in 2021 was accompanied by advances in the five activities surveyed. The most important positive contributions came from transport, auxiliary transport services and mail (15.1%) and information and communication (9.4%).

The other increases came from professional, administrative and complementary services (7.3%), services provided to families (18.2%) and other services (5%).

From November to December, the 1.4% increase in the volume of services was anchored by four of the five activities investigated. The highlights came from transportation (1.8%) and professional, administrative and complementary services (2.6%).

The other expansions were registered by other services (1.4%) and services provided to families (0.9%). The only negative rate in the month was that of information and communication services (-0.2%), which returned a small portion of the November gain (4.7%).

In a note, the CNC (National Confederation of Trade in Goods, Services and Tourism) assessed that the performance of the sector as a whole was benefited by the reopening of the economy in 2021. However, the entity projects a loss of breath for services in 2022.

“Considering the forecasts of low economic growth for 2022, the expectation is that tertiary activities will not present rates close to last year”, points out the entity.

“Given the rising cost of credit and inflationary resilience for a longer period, CNC revised from -0.5% to -0.8% its forecast for the services sector this year”, he adds.

Industrial production and retail

Before presenting the performance of services, the IBGE released two other sectorial indicators: industrial production and retail sales.

After two years of decline, factory production resumed growth, up 3.9% in 2021. The advance was also largely associated with a depressed comparison base.

Retail sales, on the other hand, grew by 1.4% in 2021. It was the fifth consecutive increase in trade volume, which showed signs of slowing down in the second half of last year.