Brazil's economy likely to contract by more

All else being equal, Brazil's August retail sales number cuts the 2015 consumption and growth forecasts by 0.3pp and 0.2pp respectively to -2.9% and -2.7%. 

Labour market deterioration is still in its early stages and is emerging as the most critical downside risk to growth over the medium term. Moreover, together with rising interest rates, it could eventually lead to a deterioration in household finances and put pressure on balance sheets in the banking sector.  

"Given the deteriorating labour market, Brazil is probably heading for a total consumption decline of more than 3% this year translating into an overall contraction of the economy by nearly 3% as against the current forecast of -2.5%", says Societe Generale.