Despite the growth weakness in H1 and some visible effect of the slowdown in the labour market, retail sales of Brazil on average have continued to trend up this year - in part due to the low base effect in H1 2014, but mostly due to lower inflation this year.
The retail sales of the economy were likely to post 4.8% yoy and 0.4% mom, estimates Societe Generale. The recent pace of retail sales is broadly consistent with 2- 4% yoy growth in private consumption spending although the correlation between retail sales and overall consumption growth is not quite strong enough.
Strong sales growth in 2011-12 was not reflected in overall consumption, and more recently, consumption has lagged sales growth despite its improvement.
"Nevethless, consumption growth could continue to surprise this year thanks to low inflation. Once the effect of low inflation ebbs early nex year, consumption acceleration will need support from the labour market. For now, we remain quite constructive about the labour market and consumption outlook", added Societe Generale.
