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Brazil’s Retail Sales Rise at Less Than Half the Forecast Pace

Brazil’s retail sales rose in April at less than half the pace economists forecast as inflation erodes purchasing power, complicating the government’s effort to boost growth.

Sales rose 0.5 percent from the previous month, after revised numbers showed they were unchanged in March, the national statistics agency said today in Rio de Janeiro. The number was lower than 26 of 28 forecasts from economists surveyed by Bloomberg, whose median estimate was for a 1.2 percent median rise. Retail sales grew 1.6 percent from the same month last year, below the median forecast for a 3.4 percent increase.

President Dilma Rousseff has introduced a host of measures to fuel domestic consumption in Latin America’s largest market including tax breaks and subsidized credit for the purchase of furniture and appliances. Still, Brazilian families’ year-on-year spending in the first quarter was the slowest in nine years as inflation sapped demand. Consumer price increases prompted Brazil in April to become the only country in the Group of 20 Nations to raise rates, which threatens to limit the recovery in demand.

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, fell one basis point, or 0.01 percentage point, to 9.72 percent at 9:18 a.m. local time. The real strengthened 0.4 percent to 2.1486 per U.S. dollar.

Food, Beverages

The retail sales increase included a 0.5 percent fall in supermarkets and hypermarkets, including food, beverages and tobacco. The broader retail index, which includes cars and construction materials, jumped 9.1 percent from the year before after rising 3.1 percent in March, the agency said today.

Rousseff yesterday announced subsidized credit totaling 18.7 billion reais ($8.7 billion) for low-income families to purchase furniture and appliances.

“Giving dignity to a family also consists of providing access to the goods that all consumers want, the best ones possible,” Rousseff said.

The measure will increase sales of the goods by 10 percent to 15 percent, the chairwoman of Brazil retailer Magazine Luiza (MGLU3), Luiza Trajano, said in an interview after the announcement. The program should generate demand of 12 billion reais to 15 billion reais, said Eneas Pestana, chief executive of Cia. Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, in a June 6 interview.

Consumer confidence in May hit a three-year low after Brazil’s family consumption in the first quarter rose 0.1 percent from the prior quarter. Gross domestic product expanded 0.6 percent in the quarter, and economists in the latest central bank survey forecast growth of 2.53 percent this year, down from 2.93 percent before the May 29 release of the GDP data.

Inflation, which has remained above the 4.5 percent midpoint of the target since central bank president Alexandre Tombini took office in January 2011, in May quickened to 6.5 percent, the top of the bank’s target range.

To contact the reporter on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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