Brazil’s retail sales seem to have dropped again in November

Retail sales in Brazil continue to decline at a considerable annual rate in spite of rising in November. Following a brief rebound in June, retail sales declined at an annual rate of 5.5 percent to 6 percent in the third quarter before suddenly declining again in October. Given the continuing deterioration of the labor market because of the ongoing recession, and government spending on social security coming under fiscal stress, pressure on retail sales is expected to continue in the near term.

“We expect retail sales to have fallen by 6.5 percent yoy in November, which would translate into a seasonally adjusted gain of 1.0 percent mom for the month”, said Societe Generale in a research report.

The pace of decline in sales suggests a contraction of household consumption in the December quarter. In the medium term, lower inflation and interest rates would assist in reversing the impacts of the labor market deterioration and lower social security spending. But retail sales and overall private consumption growth should continue to be a drag on GDP growth throughout 2018, stated Societe Generale. Significant investment momentum would be required to reverse the downward trajectory in consumption and employment.