Brazil’s retail sales rose more than expected in August from a month earlier, fueled by record low unemployment and credit expansion.
Sales rose 2.0 percent in August from July, the national statistic agency said today in a report distributed in Rio de Janeiro. Economists expected a 1.6 percent gain, according to the median forecast in a Bloomberg survey of 28 analysts. Sales rose 10.4 percent from a year ago, the agency said.
Traders are wagering that domestic demand will reignite inflation, forcing policy makers to resume interest rate increases in the first quarter of next year, according to Bloomberg estimates based on interest rate futures contracts. The central bank kept the benchmark interest rate unchanged at 10.75 percent on Sept. 1, saying the increases at the previous three meetings were enough to ensure that inflation would slow toward the 4.5 percent target.
Today’s sales report “shows economic growth is recovering after slowing in the second quarter,” Roberto Padovani, chief economist at Banco WestLB do Brasil, said in a phone interview from Sao Paulo. “Domestic consumption is being determined by the labor market and the expansion of credit. ”
The yield on interest rate futures contracts maturing in January 2012, the most traded in Sao Paulo, fell one basis point, or 0.01 percentage point to 11.33 percent at 9:27 a.m. New York time. The real declined 0.4 percent to 1.6592 per U.S. dollar, reversing earlier gains.
Padovani said the August figure isn’t enough to prompt the central bank to change its view that interest rates can remain unchanged.
“It is too risky to take a decision based on single a figure,” he said. “The economy is strong, but it may decelerate.”
The country’s unemployment rate unexpectedly fell to a record low of 6.7 percent in August, signaling Latin America’s biggest economy continues to expand at a pace that may stoke inflation. At the same time, bank lending expanded in August at its fastest pace since July 2009, according to central bank figures.
The economy will grow 7.55 percent this year, the fastest pace in a quarter of the century, according to the median estimate in an Oct. 8 central bank survey of about 100 economists. The same survey shows economists expect inflation will quicken to 4.98 percent next year.
Monthly inflation accelerated 0.45 percent last month, the national statistic agency said.
Policy makers forecast inflation will slow to 4.6 percent next year should the overnight interest rate remain unchanged at 10.75 percent, according to a Sept. 30 report.