There are only so many televisions, washing machines and new cars Brazilians can buy. After propelling Brazil’s economy for the past few years, retail sales in the country have shown further signs of slowing.
Sales in the sector rose 4.1 per cent in September from a year earlier, according to data released on Wednesday. While that ranked as the seventh straight month of expansion, the figure was far below the 6.2 per cent annual growth rate in August and also below analyst estimates.
Retail sales of over 4 per cent might not sound that bad but given unemployment is at near-record lows in the country, the sector should be booming. However, rising household debts as well as concerns over inflation have scared off shoppers. Sales volumes rose 0.5 per cent in September from August, largely dragged down by a 0.2 per cent drop in furniture and home appliances sales. The country’s broader retail sales measure that includes cars and construction materials declined 0.7 per cent from August.
There is now a very real possibility that Brazil’s economy contracted in the third quarter. Although, as Luciano Rostagno, chief strategist at Banco Mizuho in São Paulo, says, the chances of any meaningful policy changes at this stage are slim. ‘Shop ‘til you drop’ is still the favoured economic model, it seems.
This from Rostagno:
The slowdown of the broad index of retail sales in the third quarter coupled with a 1.4% contraction of industrial output support our view that the Brazilian economy experienced a sharp slowdown in the third quarter, with real chances of a negative quarter-over-quarter print.
We expect upcoming economic data in Brazil to prove that the government’s choice to continue stimulating domestic consumption was wrong, leading the economy to remain stuck in a low-growth-high-inflation equilibrium. Although the situation clearly demands an urgent shift in economic policy, unfortunately we cannot expect it to happen until the elections are over next year.
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