Brazil’s retail sales indicate that Q3 consumption could be nearly 45% worse than estimated

At -6.9% yoy (-0.9% mom), August retail sales were much weaker than expected and the worst since early 2003. All of the major sales segments fell sharply - with the exception of medical care and cosmetics - as consumers felt the pinch due to higher unemployment, inflation and interest rates and, possibly, the tightening of government social security spending. Assuming that the same rate of decline persists in September, consumption likely declined at a much sharper pace in yoy terms in Q3 than in Q2.

"Given the August sales numbers and our assumptions for September, we now estimate consumption growth in Q3 at nearly -4% yoy or -4.8% qoq (annualised) as against our recently revised forecast of -3.3% qoq (annualised). The new consumption estimate is, therefore, nearly 45% worse than our previous estimate",says Societe Generale.