Dec. 16 (Bloomberg) -- Brazil’s retail sales surprisingly accelerated in October, before the effects of the global credit crunch had begun to slow Latin America’s biggest economy.

Sales surged 10.1 percent in October from a year ago, faster than the revised 9.3 percent annual gain in September and beating the forecast of 26 of 27 economists in a Bloomberg survey whose median forecast was for a 9 percent rise.

Latin America’s biggest economy unexpectedly expanded at the fastest pace in four years in the third quarter as consumer demand surged, a report last week showed. Sustained growth of real earnings coupled with accelerating private consumption pushed sales to a sixth month of double-digit growth in October.

“The crisis hasn’t hurt Brazilian consumers yet,” said Luiz Goes, a partner at the Gouvea de Souza consultancy firm, in a Bloomberg Television interview today in Sao Paulo. “Consumers still don’t see a clear reason to cut their shopping as most people haven’t been hurt by unemployment or salary cuts.”

Since September, signs that the global credit crisis has spread to Brazil include slowing industrial production in October and a plunge in auto sales and registrations in November.

Lagging Indicator

In response, Brazilian President Luiz Inacio Lula da Silva has urged Brazilians to continue to spend and has also cut 8.4 billion reais ($3.4 billion) in taxes, ordered state-run banks to open new credit lines and pledged 8 billion reais to carmakers to boost household spending responsible for 60 percent of the economy.

“Today’s report is a reflection of an economy that no longer exists,” said Leonardo Sapienza, chief economist at Banco Votorantim SA, in a phone interview from Sao Paulo. “The worst is still to come.” He expects Brazil’s economy to grow 1.5 percent in 2009, compared to the 6.8 annual percent pace of the third quarter.

October’s report, led by a 44 percent surge in computer sales, came before companies such as Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, began laying off workers and suspending production, Sapienza said. Carmakers such as General Motors Corp. and Volkswagen AG have given thousands of workers early vacations to halt production as sales stall.

On a month-on-month basis, sales fell 0.3 percent, the biggest contraction since a 0.4 percent decline in July 2006.

Retail sales growth may slow in November and December due to the crisis, Goes said.

“Sectors that are dependent on credit, such as vehicles, will suffer more in the following months,” Goes said.

The currency strengthened 2.9 percent to 2.3149 per dollar at 3:33 p.m. New York time, compared with 2.3847 yesterday.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net. Joshua Goodman in Rio de Janeiro jgoodman19@bloomberg.net

Last Updated: December 16, 2008 15:35 EST