Brazil retail sales likely grew modestly in March but consumption trending downward

The monthly retail sales in Brazil are expected to have grown modestly at 1.0% yoy in March following the sharpest fall since 2003 at -3.1% yoy in February. The seasonally adjusted series should show a relatively stronger gain of 0.8% mom, which should help cut the sequential decline in sales to -2.4% qoq (at annualized rate) or -0.45% yoy in Q1. These more recent numbers aside, both retail sales and overall private consumption growth have been on a downward trajectory.

In recent months, growth in retail sales and private consumption has been flat at best compared even with the normal growth of 6.3% and 3.9% during 2012-13, leaving aside the cyclical peaks of 8.8% and 5.6% in 2010-11. Sadly, the shape and outlook of the labour market in particular and the overall economy in general offer little hope of a near to medium term revival in consumption. 

In fact, the labour market is expected to deteriorate substantially over the next few quarters as a lagged response to the ongoing recession and this is bound to hit wage growth, income and private consumption, observes Societe Generale. 

Further to this, the government's proposal to keep social security spending in check - in a bid to improve fiscal balances - will also hurt consumption growth over the next several quarters. It will require substantial investment and growth momentum to reverse the current downward trajectory in private consumption.