Brazil Retail Sales Rise Less Than Forecast as Prices Gain

Brazilian 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 climbed 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 increase was less than forecast by 26 of 28 economists surveyed by Bloomberg, whose median estimate was for growth of 1.2 percent.

Gains were muted by a 0.5 percent decline in sales at supermarkets and hypermarkets, including food, drinks and tobacco, which account for 52 percent of the index, according to Carlos Kawall, chief economist at Banco J. Safra SA. It was the third consecutive decline in the sub-index.

“Consumer confidence is not looking good due to inflation and inflation of course hurts the poor,” Kawall said by telephone from Sao Paulo. “Where consumption depends on real income and not credit is where you’re getting hurt.”

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. Yet, Brazilian families’ year-on-year spending growth 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.

‘Fragile Credit’

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, were unchanged at 9.73 percent at 10:06 a.m. local time. The real strengthened 0.6 percent to

2.1426 per U.S. dollar.

Retail sales grew 1.6 percent from the same month last year, below the median forecast for a 3.4 percent increase. Furniture and appliance sales rose 0.7 percent from March and

9.2 percent year-on-year. Results for such credit-based sales were lower than expected due to weak credit conditions, according to Roberto Padovani, chief economist at Votorantim Ctvm.

“You still see a fragile credit market, and the expected rebound is not happening,” Padovani said by telephone from Sao Paulo. “Consumption is no longer the main growth engine in the country. Debt levels are high.”

Consumer Confidence

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.

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 in Brasilia.

The measure will increase sales of the goods by 10 percent to 15 percent, the chairwoman of Brazil retailer Magazine Luiza, 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.

Broader Sales

Inflation, which has remained above the 4.5 percent 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.

The bank cited the resilience of inflation as it raised the benchmark rate by a total of 75 basis points in the past two months, pushing it to 8 percent from a record low.

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 statistics agency said today.

Car sales in April climbed to 333,738 units, the highest level since December, according to Brazil’s vehicle manufacturing association Anfavea.