The year 2025 will be challenging for small and medium-sized enterprises, according to the Omie Small and Medium Business Economic Performance Index (IODE-SMBs). The survey indicates that the revenue of Brazilian small and medium-sized enterprises (SMEs) recorded a decrease of 1.2% in the first quarter of this year compared to the same period in 2024. In comparison to the fourth quarter of 2024, the drop was even greater (-1.5%).
This performance represents the worst result of the indicator since the last quarter of 2021, reflecting the loss of momentum in certain Services segments, in addition to the retreat in SMEs from the industrial and infrastructure sectors.
Figure 1: IODE-SMBs (Index number – base: average 2023=100)
Source: IODE-SMBs (Omie)
The IODE-SMEs functions as an economic thermometer for companies with annual revenues of up to R$50 million, monitoring 736 economic activities that make up 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 management platform (ERP), the IODE-SMEs had already signaled a significant loss of dynamism in the SME market starting from the mid-fourth quarter of 2024, amid the deterioration of the domestic macroeconomic scenario. “Despite the continued growth in real labor incomes – the main component of Brazilian family income – the increase in fiscal uncertainties regarding the coming years has been putting pressure on inflation expectations and driving up interest rates, compromising the purchasing power of families,” he explains.
In the external scenario, the environment has also become more adverse, given the uncertainties related to the tariff policy of the United States under the Trump administration and the responses adopted by other major economies, notably China.
One piece of data that reinforces this scenario of greater difficulties for the evolution of SMEs’ businesses was the significant drop in consumer confidence between December 2024 and February 2025 (-7.6% during the period), as indicated by the FGV-IBRE Consumer Survey. This decline mainly reflected the worsening expectations of economic agents.
In the same direction, the latest edition (March) of the Omie Small Business Survey reinforces this landscape of deteriorating expectations of small entrepreneurs regarding the domestic economic environment. The survey shows that business owners are more pessimistic, with 51% indicating a perspective of worsening economy, a higher number than the 39% in the survey conducted in September 2024. ‘Given this context, the decline in the SMEs’ IODE in the first quarter of 2025 reinforces the perception that this will be a more challenging year for the Brazilian economy,’ commented the economist.
Despite setbacks in various sectors at the beginning of the year, Commerce remained in positive territory, according to the index. SMEs recorded a 7.9% growth in real average revenue in the first quarter of 2025 compared to the same period in 2024. However, the disaggregated analysis shows significantly different performances between wholesale and retail.
PMEs in the wholesale trade sector showed significant growth of 10.2% in this first quarter, boosting the overall market performance. ‘Wholesale trade of beverages,’ ‘Wholesale trade of resins and elastomers,’ and ‘Wholesale trade of paper and cardboard waste’ were the activities with the most prominent performance.
Already in retail, after signs of recovery throughout the second half of 2024, SMEs once again saw a modest decline of 1.3% in this first quarter. ‘Veterinary drugstore retail’, ‘Office equipment retail’, and ‘Book retail’ were the activities that continued to show positive performance in the period.
Figure 2: IODE-SMEs – sectoral openings
(1Q2025 x 1Q2024)
Source: IODE-SMEs (Omie)
The Services sector is the largest market for SMEs in terms of the volume of companies. In this segment, IODE-SMEs points to stability in average revenue, with a variation of -0.2% compared to the same period of the previous year. On one hand, the sector has been negatively impacted by the weakening of activities that stood out in 2024, such as ‘Food’, ‘Professional, scientific and technical activities’ and ‘Personal services’. On the other hand, the sector had good numbers in the 1st quarter due to the growth of ‘Information and communication’, ‘Transport and storage’ and ‘Financial activities’.
The results of retail SMEs and some segments of the Services sector highlight the recent impact of rising inflationary pressures and the decline in economic agents’ confidence, factors that have reduced family consumption momentum. In addition, the scenario of rising interest rates in the country has particularly harmed capital-intensive activities, as demonstrated by the results of IODE-SMEs in the industry and infrastructure sectors.
In the Industry, there has been a loss of momentum since the second half of 2024, with the contraction intensifying in the early months of 2025. In the first quarter of this year, the sector recorded a decline of 5.8%, and the contraction among industrial SMEs appears to be widespread among the activities monitored by the index. Of the 23 subsectors of the manufacturing industry tracked by IODE-SMEs, 15 showed negative performance. Nevertheless, some activities showed resilience and continued to grow during the period, notably: ‘Printing and reproduction of recorded media’, ‘Manufacture of wood products’, and ‘Manufacture of metal products’.
In the Infrastructure segment, SMEs resumed their decline, with a contraction of 3.3% in this first quarter, after the positive performance recorded in the fourth quarter of 2024 (+9.7% YoY). The negative result affects activities such as ‘Infrastructure Works’, ‘Building Construction’, and even ‘Specialized services for construction’. On the other hand, the maintenance of growth in activities related to ‘Water, sewage, waste management, and decontamination’ helped to prevent an even steeper decline in the sector as a whole in recent months.
Finally, IODE-SMEs also allows for the regional analysis of the behavior of Brazilian SMEs. In the first quarter of 2025, the index reveals that the SME market remained in positive territory in the Southeast region (+0.6% YoY) and, especially, in the Midwest region (+2.5% YoY). On the other hand, an average contraction was recorded in the Southern region (-3.5% YoY), Northeast region (-3.5% YoY), and Northern region (-10.4% YoY), which highlights the market’s heterogeneity among the different regions of the country.
According to Segundo Beraldi, despite significant macroeconomic challenges on the horizon, the basic scenario for the Brazilian economy does not suggest a complete halt to growth. “In general terms, the recent results of IODE-PMEs reinforce the expectation that the SME sector should grow more in line with the overall projections for the Brazilian GDP (with the median of forecasts currently around 2%, according to the Central Bank’s Boletim Focus). This scenario is different from recent years, when the SME market grew at a faster pace than the economy as a whole,” evaluates.
