Brazil: Retail sales show economy not as good as thought

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.”

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