Brazil’s June Retail Sales Decline for Fifth Month in a Row

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Brazil’s retail sales in June fell for the fifth straight month, as the central bank signals it will hold interest rates at a nine-year high in the face of a looming recession.

Sales dropped 0.4 percent after a 0.9 percent decline in May, the national statistics agency said in Rio de Janeiro. That was in line with the median estimate from 34 economists surveyed by Bloomberg.

The fifth consecutive drop reflects the impact of higher joblessness, above-target inflation and record-low consumer confidence in Latin America’s largest economy. The slowdown in families’ spending, which has been the motor of economic growth for the last decade, has been exacerbated by policy makers raising borrowing costs to damp price increases.

“There are adjustments downwards in real wages and employment,” Petro Tuesta, senior economist for Latin America at 4cast Ltd, said by phone. “When there is uncertainty about income, people cut purchases.”

Swap rates on the contract due January 2017 fell 14 basis points, or 0.14 percentage points, to 13.89 percent at 9.43 a.m. local time. The real strengthened 0.1 percent to 3.4715 per U.S. dollar.

Sales of food, beverages and tobacco at hypermarkets and supermarkets were unchanged after a revised 1 percent decline in May. Furniture and appliance sales dropped 1.2 percent.

Seven Straight

In a bid to stem consumer price increases, the central bank has raised borrowing costs even as analysts forecast a recession for the year. After seven straight increases to Brazil’s key rate, the Selic sits at 14.25 percent.

Annual inflation in July reached 9.56 percent, more than double the official target of 4.5 percent.

Retail sales in June fell 2.7 percent from the previous year, versus a median forecast of a 2.9 percent decline. That follows a 4.5 percent slide in May. The broader retail index, which includes cars and construction materials, tumbled 3.5 percent from a year ago, versus a median estimate for a 4.9 percent drop.

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