Brazil's services sector expansion eased in August as demand conditions softened, though business confidence remained elevated, according to a survey released on September 4.

The S&P Global Brazil Services PMI fell to 54.2 in August from 56.4 in July, signalling a robust but slower rise in output. The index has now remained above the 50-mark separating growth from contraction for 11 consecutive months.

Survey respondents attributed the continued growth to increased sales, digital marketing investments, new client acquisitions and positive demand trends. However, the latest reading pointed to the slowest upturn since April.

New business inflows increased for the 11th month running, supported by improving domestic demand. Though the rise was the least pronounced since early 2024, it remained solid and above the survey's long-run average.

"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.

“That said, high borrowing costs and rising price pressures could take a toll on consumer spending and business investment,” she added.

Input costs rose at the steepest rate in 25 months, with firms citing currency depreciation, market inflation, droughts, and lingering effects of flooding in Rio Grande do Sul as key factors. Approximately one-third of surveyed companies reported increased input costs.

In response to rising expenses and sustained demand, service providers raised their selling prices at the strongest rate in nearly 18 months.

Employment in the sector continued to grow, with the rate of job creation reaching a three-month high. More than half of the surveyed firms (52%) forecast increased output over the next year, while only 2% predicted a decline.

However, the overall level of positive sentiment dipped to a four-month low due to concerns about defaults, legal uncertainty, and political issues.

Meanwhile, the S&P Global Brazil Composite PMI – which includes both services and manufacturing – fell to 52.9 in August from July's 25-month high of 56.0. This decline was partly due to a contraction in factory production, whilst services activity continued to expand, albeit at the weakest pace since April.

Despite the slowdown, sustained sales growth and optimistic outlook continued to support job creation across the private sector. Input price inflation at the composite level accelerated to a two-year high, with cost pressures most intense in the manufacturing sector.