March data indicated the sharpest downturn in business activity across the Brazilian service sector since the survey began 13 years ago, which was almost exclusively attributed to business closures and shrinking customer demand in response to the coronavirus pandemic.
The headline seasonally adjusted IHS Markit Brazil Services Business Activity Index fell almost 16 points in March.
At 34.5, down from 50.4 in February, the latest reading signalled a rapid drop in service sector output.
Cancelled orders and business shutdowns in response to the public health emergency resulted in the fastest decline in new work since the survey began in March 2007.
Export sales also dropped at a rapid pace in the latest survey period, with the pace of contraction exceeding that recorded for overall new business volumes.
This was overwhelmingly attributed to emergency global public health measures and closed international borders in response to the coronavirus pandemic.
Despite a sharp reduction in new orders, latest data signalled only a slight drop unfinished work across the service economy.
Where a fall in backlogs of work was reported, survey respondents mainly commented on a lack of pressure on business capacity.
Service providers reported a steep fall in employment numbers during March.
The rate of job shedding was the fastest recorded since October 2016.
Anecdotal evidence from survey respondents often cited cuts to workforce levels in response to business shutdowns and the need to reduce operating expenses.
Adding to pressure on margins, latest data indicated a sharp increase in average cost burdens across the service economy.
That said, the overall rate of input price inflation was the slowest since last November.
Where a rise in purchasing costs was reported, service providers mainly commented on the influence of the strong US dollar and a corresponding increase in the price of imported items.
Average prices charged by service sector firms increased at a modest pace in March, with the rate of inflation the fastest for three months.
Survey respondents mostly cited the need to pass on higher costs to clients, although some firms suggested that price discounts had been offered to help mitigate falling customer demand.
Meanwhile, latest data indicated a severe decline in business confidence across the service economy amid the current public health emergency and global measures to halt the spread of COVID-19.
Business expectations were the weakest since the survey began in March 2007, with survey respondents often reporting concerns that the domestic economy will take a long time to recover from the severe shock to business operations. ■