Brazil’s retail sales unexpectedly fell in May and no recovery is expected in the third quarter as Latin America’s largest economy struggles to emerge from its worst recession in decades.
Sales fell 1 percent in May, the worst on record for that month, after a revised 0.3 percent increase in April, the national statistics agency said on Tuesday. The median estimate from 34 economists surveyed by Bloomberg was for a 0.4 percent increase. Sales plunged 9 percent in May versus the same month in 2015.
Brazil’s 12-month consumer inflation runs at 8.8 percent while the country’s benchmark interest rate remains at a 10-year high, at the same time eating into Brazilians purchasing power and limiting their ability to finance the purchases of goods. The economy is expected to contract for a second straight year before resuming growth in 2017.
“The near-term outlook for private consumption and retail sales remains challenging,” Goldman Sachs senior economist Alberto Ramos wrote in a note to clients, citing shrinking credit lines, high interest rates and high level of household indebtedness, as well as declining employment and real wages.
Sales may start recovering by year-end after reaching bottom in the third quarter, Rosenberg Associados consultancy said in note to clients, betting on an expected slowdown in inflation.
Six out of the eight sectors measured by the statistics agency posted lower sales in May from April, with personal and household goods falling 2.4 percent and pharmaceutical and cosmetics dropping 0.8 percent. Sales of food, beverages and tobacco products at hypermarkets and supermarkets were stable in May, after rising 1 percent in April.
Broad retail sales, which include cars, car parts, and construction materials, fell 0.4 percent from April, and 10.2 percent versus May last year, according to the statistics institute.
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