SME revenue grows in 1Q2026, with sectors at different paces

The Omie Index of Economic Performance of SMEs (IODE-SMEs) shows that the average real financial movement of Brazilian small and medium-sized enterprises recorded a growth of 4.51% in the first quarter of 2026, compared to the same period of the previous year. Thus, the index presents the third consecutive quarterly increase, surpassing the weak market performance in the first half of the previous year.

The IODE-PMEs functions as a thermometer of the economic activity of companies with an annual revenue of up to R$ 50 million, tracking around 750 economic activities distributed among the sectors of Commerce, Industry, Infrastructure, and Services.

The relative improvement in the performance of SMEs in certain segments is based on some important pillars of the macroeconomic scenario. From a cost perspective, there was a significant relief for entrepreneurs in the recent period, especially in the first three months of 2026, when compared to the same period of the previous year. Based on the General Price Index - Market (IGP-M), calculated by FGV, we observe a relevant path of cooling inflationary pressures: the accumulated over 12 months fell from 8.58% at the end of the first quarter of 2025 to the current -1.83% at the closing of the first three months of the year.

Despite the general trend observed in the index over the past year, it is important to highlight that the rise in fuel prices in March, resulting from the war in Iran, imposes a new challenge on SMEs, especially due to short-term cost pressures in various production chains.

From the perspective of demand, the resilience of the labor market — with unemployment still at historically low levels (5.81% in the quarter ending in Feb/26) and real earnings significantly above those observed in the pre-pandemic period (+13.1% in Mar/26 compared to the average of 2019), in addition to a recent growth trajectory — contributes to sustaining household consumption.

On the other hand, consumer confidence had a smaller contribution to the positive performance of SMEs in the recent period. According to the Consumer Survey by FGV IBRE, the confidence index showed a monthly average decrease of 1.11% from January to March 2026 in the seasonally adjusted series. Despite the increase in income, the decline in consumer confidence harms consumption and investment decisions.

The restrictive credit conditions continue to hinder SMEs more sensitive to interest rates, maintaining pressure on the market in the medium term. In the most recent meeting of the Copom (Monetary Policy Committee) in March/26, the committee reduced the Selic rate target by 0.25 percentage points to 14.751% per year, initiating the interest rate cut cycle after a period of 9 months with the rate at its highest level in the last two decades. The committee adopted a cautious tone due to geopolitical uncertainties in the Middle East, opening the possibility for a more contained reduction of the rate. Thus, despite the start of the cuts, it can be said that interest rates in the country remain high, with the risk of observing only a mild downward trend in the short term.

The maintenance of high interest rates in the Brazilian economy for an extended period is already producing clear side effects in the business environment, reflected both in the slowdown of activity and in the significant increase in default rates among individuals and businesses in the recent period. This context affects SMEs through two channels: in demand, by reducing consumption and access to credit; and in costs, by making working capital more expensive and increasing default rates, putting pressure on margins.

From a sectoral point of view, the recent results of IODE-PMEs once again highlight significant differences in performance among the segments, unlike what was observed in the second half of 2025. The industrial sector showed the most significant progress in the first quarter, with SMEs recording a 9.71% increase in real average revenue compared to the same period of the previous year, sustaining its position as the main positive component of the index.

The good recent performance of industrial SMEs has spread among the different segments of the manufacturing industry: of the 23 subsectors monitored, 19 showed positive results in the quarter, notably in Machinery and Equipment Manufacturing, Paper and Paper Products Manufacturing, Wood Products Manufacturing, and Metallurgy.

The SMEs in the services sector, in turn, had stable performance in the first quarter, interrupting the advance recorded in the second half of 2025, where it recorded an average growth of 4.41%. Unlike the industrial sector, the IODE-Services presented, in recent months, a performance more concentrated in specific activities, with emphasis on Professional, Scientific and Technical Activities (notably Architecture and Engineering Services), Human Health and Social Services, and Transportation.

Nonetheless, it is important to highlight the maintenance of a weaker performance in relevant segments for the SME universe, with an emphasis on Food and Education, which continue to face greater difficulties in recovery at the beginning of 2026.

In the trade sector, the index indicates that the average real revenue of SMEs ended the first quarter of 2026 with a slight contraction of -0.31% compared to the same period of the previous year, marking the fifth consecutive decline of the sector on a quarterly basis. In the disaggregated analysis of the main segments, mixed results are observed: while wholesale remained in positive territory and retail was stable, vehicle trade experienced a strong decline.

Among the sectors with negative performance, the Infrastructure SMEs maintained the trend of contraction in the recent period, recording a decline of 1.01% in the first quarter, after a rise of 1.21% in the fourth quarter of 2025. As previously pointed out in the earlier disclosures of the index, the negative result throughout the year reflects the slowdown in the construction chain, especially given the context of high interest rates in the country — a factor that discourages investments — impacting activities such as Specialized services for construction and Building construction. Nevertheless, the positive performance of the Decontamination and waste management segment helped prevent an even sharper contraction of the sector as a whole during the period.

Finally, the IODE-PMEs also allows for a regional analysis of the performance of small and medium enterprises in Brazil. In the first quarter of 2026, the index reveals that the SME market remained in positive territory in the Southeast region (+3.81% YoY). The result is significant not only because it refers to the region that concentrates the largest share of active companies in the country but also because it reinforces the recovery trend in the market observed since Q3 2025.

The most recent regionalized data from IODE-PMEs also indicates the continuation of growth in much of the country: in the South (+7.71% YoY), Northeast (+7.31%) and Midwest (+9.51% YoY). On the other hand, a slight contraction was observed on average in the North region (-0.61% YoY).

Growth projection of IODE-PMEs in 2026 is revised to 2.21% after worsening in inflation and Selic.

The weaker results observed in the SME market at the beginning of 2026, combined with the deterioration of short-term prospects for inflation and the Selic Rate, led to a bearish revision of the IODE-SMEs projection for the year. The estimate changed from +2.91% to +2.21% compared to 2025 — a year in which the index recorded a modest growth of 1.21%. Nevertheless, even in light of this revision and new challenges in the business environment, the scenario of moderate growth for SMEs in 2026 remains.

Despite a challenging economic context, marked by the maintenance of interest rates at historically high levels and new external shocks, the main market agents do not project an interruption of domestic economic activity. According to the median expectations of the Focus Bulletin from the Central Bank, GDP is expected to grow 1.91% in 2026, indicating a slowdown compared to previous years.

Amid the high degree of uncertainty, the resilience of household income and the labor market should sustain consumption in the short term — one of the main drivers for SMEs. While high delinquency and volatile confidence pressure consumption, on the other hand, the low level of unemployment and the continued expansion of real incomes favor disposable income. In the first two months of 2026, real labor earnings were 5.31% above the same period in 2025. In this context, the real adjustment of the minimum wage contributes to this movement, even though it increases fiscal challenges.

On the credit side, the scenario remains adverse for entrepreneurs. The expectation is for high interest rates to persist throughout the year. The intensification of tensions in the Middle East, with the war in Iran, has pushed international oil prices up and pressured global fuel inflation. In Brazil, the impact was quickly observed: the IPCA of March 2026 recorded significant increases in diesel prices (+13.91%) and gasoline (+4.59%). This movement is concerning, as it compromises household income and raises costs for relevant production chains, such as food.

In this context, inflation expectations have been revised upwards, recently reaching 4.8%, above the upper limit of the target for the year. In response, projections for Selic have also increased, with an expectation of 13% by the end of 2026 — above the 12.25% projected at the beginning of the year.

In summary, the more adverse global inflationary environment poses additional challenges for SMEs in the short term, with higher cost pressures, slower demand growth, and expensive and restricted credit. The Omie Survey from April 2026 reflects this scenario: entrepreneurs show a predominantly cautious outlook, projecting stability or only marginal growth for their businesses.

In light of this, 2026 demands greater caution from entrepreneurs in an environment marked by high uncertainty and macroeconomic volatility, both domestically and internationally. Adding to this is the electoral calendar in the second half of the year, which tends to reinforce a more conservative stance in investment decisions. More than just following opinion polls, it will be essential for entrepreneurs to understand the challenges of the next government, especially in the fiscal field.

Finally, in addition to the challenging macroeconomic scenario, entrepreneurs are also beginning to deal with the biggest structural transformation of the Brazilian economy in decades: the Tax Reform. Although its effects in 2026 are still limited — especially for micro and small businesses — the moment demands preparation and understanding of future changes. The Omie Survey reveals a worrying statistic: about half of SMEs have not started or are in a very early stage of preparation for the Reform. With the advancement of the transition and the proximity of significant milestones, the time for planning is shrinking, increasing the risk of loss of competitiveness for a significant portion of the market.