Brazil November Retail Sales Jump Exceeds Analyst Forecasts

Brazil’s November retail sales rose more than economists forecast, as the central bank continues to boost interest rates to stem above-target inflation. Swap rates rose.

Sales in November rose 0.7 percent from the previous month, after rising a revised 0.3 percent in October, the national statistics agency said today in Rio de Janeiro. The number was higher than the 0.4 percent median estimate from 38 economists surveyed by Bloomberg. Retail sales jumped 7 percent from the same month last year, above the median forecast of 6.2 percent.

President Dilma Rousseff’s government is rolling back tax cuts adopted to spur demand as the central bank continues the largest rate increase cycle of economies tracked by Bloomberg. While higher rates and above-target inflation have damaged consumer confidence, record-low unemployment bolstered shoppers who kept the economy from a deeper third quarter contraction.

Today’s data “show the job market remains tight, retail sales continue moving up and the Brazilian central bank made the right decision” to maintain the pace of 50 basis-point rate increases, Luciano Rostagno, chief economist at Banco Mizuho do Brasil SA, said by phone. “The source of inflation pressure is actually internal and not external.”

Swap rates on the contract maturing in January 2015, the most traded in Sao Paulo today, rose 21 basis points, or 0.21 percentage point, to 10.95 percent at 9:56 a.m. local time. The real weakened 0.2 percent to 2.3650 per U.S. dollar.

Food, Beverages

Sales at hypermarkets and supermarkets, including food, beverages and tobacco, rose 1.1 percent, after falling 0.4 percent in October. Furniture and appliance sales increased 1.5 percent, up from 0.1 percent last month. Apparel sales jumped 1.5 percent, reversing a 0.2 percent decline.

Brazil’s consumer inflation in 2013 accelerated to 5.91 percent from 5.84 percent the prior year, above the 4.5 percent midpoint of the central bank’s target range. Consumer confidence in December fell to its second-lowest level in more than 3 1/2 years.

Policy makers voted unanimously yesterday to raise the benchmark rate to 10.50 percent from 10 percent, marking a total 325 basis-point increase since April. While the decision is the main reason for the jump in swap rates today, today’s retail data also contributed, according to Rostagno.

The November broad retail index, which includes cars and construction materials, rose 5.7 percent from a year ago, the agency said today.

Slow Growth

Standard & Poor’s in June placed Brazil’s rating on negative outlook, and Moody’s Investors Service in October lowered its outlook to stable from positive, citing deteriorating debt and investment ratios and slow growth.

Brazil’s economy contracted 0.5 percent in the third quarter, even as consumer spending rose 1 percent, the greatest increase of all components aside from government spending. Retail sales have increased for nine consecutive months.

“Although economic growth is weak, consumer spending seems to be holding up quite well, which is surprising,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by phone from London. “Over the course of this year I think we’ll see consumption start to weaken.”

The unemployment rate in November tied a record low 4.6 percent. Economists expect Brazil will grow 1.99 percent this year as inflation speeds up to 6 percent, according to the latest central bank survey.

Before it's here, it's on the Bloomberg Terminal.