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Brazil: Retail sales show economy not as good as thought - Rabobank

Retail sales in Brazil fell 0.1% in February against expectations of a 0.5% gain. Analysts at Rabobank believe that the headline helps underscore that the economy is not as exuberant as some analysts may think. 

Key Quotes: 

“Headline or “broad” retail sales fell 0.1% m/m (+5.2% y/y) in February, shy of consensus (+0.5% m/m; 6.1% y/y). That is the third month in a row with no sequential gain. Broad sales are moving at a sequential annualized speed of 2.7% in three months and 5.6% in six months. This is the slowest pace since April 2017 and we see this easing more as a natural accommodation (to what we believe is a more ‘normal’, consistent, or sustainable pace) rather than a fully-fledged weakness.”

“We continue to take the tepid retail figures of late as a natural accommodation rather than the beginning of a fully-fledged weakening trend. Despite the fading effects from positive exogenous events of late (such as the release of FGTS – mandatory savings – accounts earlier this year), the fundamentals for consumer spending remain favourable. Improving household confidence, less weak employment, rising real income, better bank lending, lower consumer indebtedness, are still consistent with a consumer-led growth for 2018.”

“In any case, we believe today’s (below-expected) retail sales headline helps underscore our point that the economy is not as exuberant as some analysts may think, favouring our below-consensus call for this year’s GDP (we have 2.2%, while consensus is 2.8%). As far as 18Q1 GDP, we look for a growth around 0.5% q-o-q.”
 

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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