The year 2025 will be challenging for small and medium-sized businesses, according to the Omie Index of Economic Performance for SMEs (IODE-PMEs). The survey indicates that the revenue of Brazilian small and medium-sized enterprises (SMEs) contracted by 1.2% in the first quarter of this year compared to the same period in 2024. Compared to the fourth quarter of 2024, the decline was even greater (-1.5%).
This performance represents the worst result for the indicator since the last quarter of 2021, reflecting a loss of momentum in certain Services segments, as well as contraction in SMEs in the industrial and infrastructure sectors.
Figure 1: IODE-PMEs
(Index number – base: 2023 average=100)
Source: IODE-PMEs (Omie)
The IODE-PMEs serves as an economic thermometer for companies with annual revenues of up to R$50 million, monitoring 736 economic activities across four major sectors: Commerce, Industry, Infrastructure, and Services.
According to Felipe Beraldi, economist and manager of Indicators and Economic Studies at Omie, a cloud-based ERP platform, the IODE-PMEs had already signaled a significant loss of dynamism in the SME market by mid-fourth quarter of 2024 amid a deteriorating domestic macroeconomic scenario. ‘Despite continued growth in real labor income—the main component of Brazilian household income—increasing fiscal uncertainties about the coming years have pressured inflationary expectations and driven rising interest rates, undermining household purchasing power,’ he explains.
In the external scenario, the environment has also become more adverse due to uncertainties surrounding U.S. tariff policy under the Trump administration and the responses adopted by other major economies, particularly China.
One data point reinforcing this outlook of greater difficulties for SME business growth was the sharp drop in consumer confidence between December 2024 and February 2025 (-7.6% in the period), as indicated by the FGV-IBRE Consumer Survey. This decline primarily reflected worsening expectations among economic agents.
Similarly, the latest edition (March) of the Omie Small Business Survey reinforces this deteriorating outlook among small entrepreneurs regarding the domestic economic environment. The survey shows that business owners are more pessimistic, with 51% signaling expectations of economic deterioration—higher than the 39% in the September 2024 survey. ‘Given this context, the drop in the IODE-PMEs in the first quarter of 2025 reinforces the perception that this will be a more challenging year for the Brazilian economy,’ comments the economist.
Despite declines in various sectors at the start of the year, Commerce remained positive, according to the index. SMEs recorded 7.9% growth in average real revenue in the first quarter of 2025 compared to the same period in 2024. However, disaggregated analysis shows stark differences between wholesale and retail.
Wholesale trade SMEs posted strong growth of 10.2% in this first quarter, driving overall market performance. ‘Wholesale trade of beverages,’ ‘Wholesale trade of resins and elastomers,’ and ‘Wholesale trade of paper and cardboard waste’ were the standout activities.
Meanwhile, retail SMEs, after signs of recovery in the second half of 2024, recorded a modest decline of 1.3% in this first quarter. ‘Retail of veterinary medicines,’ ‘Retail of office equipment,’ and ‘Retail of books’ were the activities that continued to show positive performance in the period.
Figure 2: IODE-PMEs – Sector Breakdown
(Q1 2025 vs. Q1 2024)
Source: IODE-PMEs (Omie)
The Services sector is the largest market for SMEs in terms of the number of companies. In this segment, the IODE-PMEs indicates stability in average revenue, with a -0.2% change compared to the same period last year. On one hand, the sector has been negatively impacted by weakening activities that stood out in 2024, such as ‘Food services,’ ‘Professional, scientific, and technical activities,’ and ‘Personal services.’ On the other hand, the sector posted strong numbers in Q1 due to growth in ‘Information and communication,’ ‘Transportation and Storage,’ and ‘Financial activities.’
The results for retail SMEs and some segments in the Services sector highlight the recent impact of rising inflationary pressures and declining economic confidence—factors that have reduced household consumption momentum. Additionally, rising interest rates in the country have particularly harmed more capital-intensive activities, as evidenced by the IODE-PMEs results for the Industry and Infrastructure sectors.
In Industry, momentum has slowed since the second half of 2024, with contractions intensifying in early 2025. In the first quarter of this year, the sector saw a 5.8% decline, and the downturn among industrial SMEs is widespread across activities monitored by the index. Of the 23 manufacturing subsectors tracked by the IODE-PMEs, 15 posted negative performance. Still, some activities showed resilience and continued growing, notably: ‘Printing and reproduction of recordings,’ ‘Manufacture of wood products,’ and ‘Manufacture of metal products.’
In Infrastructure, SMEs posted another decline, contracting 3.3% in this first quarter following positive performance in Q4 2024 (+9.7% YoY). The negative result affects activities such as ‘Infrastructure construction,’ ‘Building construction,’ and even ‘Specialized construction services.’ On the other hand, continued growth in ‘Water, sewage, waste management, and remediation’ helped mitigate a sharper sector-wide decline in recent months.
Finally, the IODE-PMEs also allows for regional analysis of Brazilian SME performance. In Q1 2025, the index shows that the SME market remained positive in the Southeast (+0.6% YoY) and, especially, the Central-West (+2.5% YoY). Conversely, contractions were recorded on average in the South (-3.5% YoY), Northeast (-3.5% YoY), and North (-10.4% YoY), highlighting market heterogeneity across the country’s regions.
According to Beraldi, despite major macroeconomic challenges on the horizon, the baseline scenario for the Brazilian economy does not suggest a complete halt to growth. ‘Broadly speaking, recent IODE-PMEs results reinforce expectations that the SME sector should grow more in line with overall projections for Brazilian GDP (currently around 2%, according to the Central Bank’s Boletim Focus). This scenario differs from recent years, when the SME market grew faster than the economy as a whole,’ he evaluates.
