Despite higher-than-expected sales, retail should continue to be impacted by inflation and high interest rates

After the unexpected advance of the service sector, now it was the Brazilian retail that surprised positively. Sales grew 0.6% between October and November last year, interrupting a sequence of three monthly declines. the consensus Refinitiv of financial market economists pointed to the indicator’s stability and many analysis houses were betting on a retraction. Is it a trend reversal signal?

Even though it came better than expected, the indicator didn’t just bring good news. Five of the eight activities that make up the Monthly Trade Survey (PMC) had a negative result in the period, that is, it is not possible to say that the expansion of retail was extensive. Sales of fuels and lubricants and of furniture and appliances have been falling for six consecutive months.

Retail activity in November benefited from a 0.9% increase in food and beverage sales, a 1.2% increase in pharmaceutical products and a 2.2% increase in other personal goods, which are usually driven by the Sexta-feira Negra. Still, the Brazilian Institute of Geography and Statistics (IBGE) highlighted the weakest performance to date in 2021, compared to previous years. Supply chain issues contributed to this negative impact.

“This result shows that, with the acceleration of inflation, families prioritized the consumption of basic items (food) to the detriment of durable and semi-durable goods”, says João Leal, economist at Rio Bravo. For him, the sector’s progress “continues to be qualitatively fragile.”

Rodolfo Margato, economist at XP, says that retail activities have been hampered by very pressured inflation, low wages, tightening financial conditions and shifting a greater proportion of household spending from goods to services, with the reopening of the economy.

“So we don’t interpret the positive surprise with the performance of sales in November as a sign of a trend reversal”, says Margato. According to the economist, although credit market statistics remain solid, the combination of high interest rates and the growing commitment of household income tends to dampen loans throughout 2022.

For Itaú BBA, the growth in retail sales should not change the bets for the next meeting of the Monetary Policy Committee (Copom) “of a new dose of 150 basis points in the Selic rate”. [1,5 ponto percentual]”.

“In addition, the increase [de casos] of the Omicron variant is also likely to affect retail activity (albeit less so than services), particularly in high-density retail outlets,” wrote the Goldman Sachs analysts.

Felipe Sichel, chief strategist at Modalmais, believes that the advance of the pandemic can counterbalance the scenario with a lower consumption of services, which could somehow benefit retail, in addition to the payment of Auxílio Brasil.


“With monthly IBGE readings, we have revised our IBC-Br forecast from 0.51% to 0.61% in November,” Sichel wrote.

XP expects a 0.7% advance in the index, popularly known as “GDP preview”, and which will be released next Monday (17). For the fourth quarter GDP in yes, XP’s forecast is for growth of only 0.1% in relation to the immediately previous quarter and 1% in the annual comparison.

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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