Brazil’s retail sales fell by 0.1% in January, marking the third monthly decline. Four of eight key sectors recorded decreases. The central bank is expected to raise interest rates to combat inflation, while annual sales growth slightly exceeded expectations at 3.1%.
In January, Brazil’s retail sales experienced a decline for the third consecutive month, as reported by the Brazilian government statistics agency IBGE. This 0.1% decrease from December adds pressure to an already sluggish economic landscape in Latin America’s largest economy, coinciding with earlier reports of weakened industrial output and service activities for the same month.
Four of the eight key retail sectors monitored by IBGE witnessed drops in sales, particularly pharmaceutical and food products. Notably, sales in office supplies and fuel showed increases month-over-month, revealing a mixed performance among retail categories.
To combat rising inflation, Brazil’s central bank has been tightening its monetary policy, anticipating another 100-basis-point hike in interest rates, potentially raising the benchmark rate to 14.25%. Despite the ongoing decline in retail sales volumes, the annual growth rate for January was reported at 3.1%, exceeding economist expectations of 1.9% as per a Reuters poll.
Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, suggested that while the overall annual figures appeared positive, they were primarily due to mean reversion. He emphasized that underlying economic conditions indicate persistent deterioration in consumer spending at the year’s onset.
Brazil’s retail sector continues to face challenges, reflected in the third consecutive monthly decline in sales volumes. While some categories recorded growth, the overall economic indicators point towards ongoing weaknesses as the central bank prepares for further interest rate increases to manage inflation. Economists remain cautious, noting the complexity of the situation as consumer spending shows signs of strain.
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