Brazil April retail sales surprised on the downside, printing at -0.4% m/m sa (-3.5% y/y), and when including auto & construction materials, broad retail sales fell by -0.3% m/m sa (-8.5% y/y), while expectations were for a flat print of this indicator. Sector-wise, growth was negative in seven out of ten sectors.
The decline of 0.3% m/m sa of supermarket, food & beverages sales explains the downside surprise, given that leading indicators for the sector was showing a 2.7% m/m sa increase. It is also noteworthy the fairly soft reading of furniture (-2.2% m/m sa) and auto sales (-3.7% m/m sa), even with the latter already suggested by the leading indicators showing a 1.5% drop in auto sales.
According to Barclays Capital, "Today's downside surprise supports the fairly bleak outlook for the retail sector. The labor market adjustment, combining higher unemployment and negative wage growth, should lead household consumption to contract this year, and the negative sentiment of the retail sector corroborates our view."
