Oct. 15 (Bloomberg) -- Brazil’s retail sales rose for the fourth consecutive month in August, cementing expectations that a gradual recovery of domestic demand will continue to support economic growth in Latin America’s biggest economy.

Retail sales rose 4.7 percent in August from a year ago, less than the median forecast of a 5.3 percent rise in a Bloomberg survey of 25 economists. The figures compare with a 6 percent increase in July from the same month a year ago, the national statistics agency said today in Rio de Janeiro.

Sales rose 0.7 percent from a month earlier, below the 0.8 percent median forecast by 20 analysts surveyed by Bloomberg.

“The numbers show local demand continues to recover at a gradual pace,” said Diego Donadio, a senior analyst for Latin America at BNP Paribas in Sao Paulo. “It reinforces our view that growth will be measured, and won’t pressure inflation for quite a while.”

The broader retail index, including cars and construction materials, rose 3.3 percent in August from the previous month, after falling 5.7 percent in July.

The International Monetary Fund and analysts including Goldman Sachs Group Inc. have raised their forecast for a faster economic recovery after Brazil exited its first recession since 2003 in the second quarter.

Gross domestic product expanded 1.9 percent in the April- June period from the previous quarter, beating analyst expectations for a 1.7 percent rise. Finance Minister Guido Mantega last week said the economy can grow 5 percent next year.

New Trend

Goldman Sachs Chief Economist Jim O’Neill said yesterday that Brazil’s economy may grow more than 5 percent annually “for many years” if the next government can keep inflation in check and interest rates low.

Investors are betting that annual inflation, which slowed for the seventh month in September to 4.34 percent, may accelerate as the recovery gains traction, forcing policy makers to raise lending rates next year.

Yields on the overnight-rate futures for April delivery have risen 4 basis points this month, or 0.04 percentage point, indicating traders expect the central bank to lift the benchmark Selic rate to about 10.19 percent in April from a current record low of 8.75 percent, according to data compiled by Bloomberg.

The real, the best-performing currency among 16 major currencies tracked by Bloomberg, has gained 36 percent this year. It was little changed at 1.7010 per dollar at 2:40 p.m. New York time. The Bovespa index has jumped 76.5 percent this year, compared with a 26 percent gain in the MSCI World Index of developed countries.

Rebound

JPMorgan Chase & Co. predicts policy makers will begin lifting rates as early as January. About 100 analysts in a central bank survey taken Oct. 9 said they expect the Selic to end next year at 10.25 percent, a half-point higher than they expected a week earlier.

Brazil’s central bank last month left the benchmark interest rate unchanged at 8.75 percent, signaling that five cuts since January were enough to stoke investment and non- inflationary growth.

Consumer product supplier Hypermarcas SA may spend up to 500 million reais ($292 million) in acquisitions, Chief Executive Officer Claudio Bergamo said Oct. 8, after acquiring the Jontex condom brand from Johnson & Johnson for $101 million.

Better salaries and rising employment have supported supermarket sales, which posted the second-biggest gain in the 10 categories making up the index, BNP’s Donadio said.

Supermarket sales rose 1.4 percent in August compared with the previous month. Vehicle sales posted a 2.5 percent rise in August, IBGE said.

Unemployment, which peaked at 9 percent in March, stood at 8.1 percent in August. Job creation in September, at 252,617, was the fastest since September, when the global financial crisis started to force layoffs.

So far this year, Brazil has added 1.03 million jobs, erasing nearly 800,000 layoffs during the crisis. Last year, Brazil added 1.45 million jobs.

To contact the reporters on this story: Joshua Goodman in Rio de Janeiro at Jgoodman19@bloomberg.net; Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net

Last Updated: October 15, 2009 14:45 EDT