Brazil services activity down more than expected in January

SAO PAULO, March 13 (Reuters) - Brazil's services sector fell slightly more than expected in January, data from statistics agency IBGE showed on Thursday, in the latest indication economic activity is slowing.

Service sector activity, the main driver of Latin America's largest economy, was down 0.2% in January from the previous month, IBGE said, maintaining the downward trend since it hit an all-time high in October of last year.

Economists polled by Reuters had expected a 0.1% drop.

Brazil had already posted weaker than expected industrial output data for the month, as high interest rates weighed and the central bank seeks to bring inflation back to its 3% target.

The local benchmark interest rate stands at 13.25%, and policymakers have indicated they are considering an additional hike of 100 basis points for their meeting later this month.

The January services drop was driven mainly by the transport segment, which posted a 1.8% month-on-month fall. Three of the five main groups surveyed by IBGE were down in the period, the agency said.

IBGE revised both November and December services data upwards by 50 basis points each, but economists said the sector was still weak.

"Relative to our expectations, the services output disappointed even after revisions," JPMorgan's Vinicius Moreira and Cassiana Fernandez wrote in a note.

"While a deceleration of domestic demand is expected this year, this release suggests a weaker-than-anticipated performance that maintains downside risks to this year's GDP growth forecasts."

On an annual basis, according to IBGE, services output grew 1.6% in January from January 2024. Economists had forecast a median rise of +1.9% in a Reuters poll.