SAO PAULO (Reuters) -Services activity in Brazil grew more than expected in June to hit an all-time high, eclipsing a record that had been set in December 2022, data from statistics agency IBGE showed on Tuesday.
The service sector, which accounts for about 70% of all activity in Latin America's largest economy, grew 1.7% in June from the previous month, IBGE said, exceeding the 0.8% expected by analysts polled by Reuters.
All of the five main groups surveyed by the agency posted positive results in the period, with an 1.8% expansion in transportation notably offsetting a negative reading in the previous month, IBGE said.
"The result is largely due to air transport, driven by a drop in air ticket prices," IBGE research manager Rodrigo Lobo said.
Services activity was also up 1.3% in June from a year earlier, according to IBGE, again beating the 0.8% expected by economists in the Reuters poll.
The sector now stands 0.5% above the previous record high in the IBGE data series, which had been set in late 2022, the statistics agency added.
"Our assessment indicates that Brazil's economic activity continues to perform well," said PicPay economist Igor Cadilhac, highlighting a strong labor market.
"We expect this scenario to continue throughout the year, despite recent deterioration in inflation and the need to keep interest rates high for longer."
Brazil's central bank recently flagged greater caution in its monetary policy stance and said it would raise interest rates if needed to control inflation. The country's benchmark interest rate Selic currently stands at 10.5%.
Claudia Moreno, economist at lender C6, said that a slowdown in activity as a whole is expected for the second half of the year, "which should make the services sector move sideways."
She still believes, however, that the sector will contribute to Brazil's gross domestic product growth in 2024.
Private sector economists expect Brazil's economy to expand 2.20% this year, according to a weekly central bank survey.