Brazil April Retail Sales Fall More Than Economists Forecast

Brazil’s retail sales in April fell more than economists forecast, as the central bank signals it will keep rates on hold amid declining confidence.

Sales fell 0.4 percent after a 0.5 percent decline the previous month, marking the second straight month results came in below forecasts, the national statistics agency said today in Rio de Janeiro. The median estimate from 32 economists surveyed by Bloomberg was for April sales to fall 0.1 percent.

Retail sales in Brazil have stagnated as accelerating inflation and higher interest rates erode consumer confidence. President Dilma Rousseff has also seen her support in polls dwindle ahead of October elections after economic growth slowed since she took office. There is “growing risk” the slowdown will deepen and the economy will contract, according to Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc.

“The only engine that was maintaining the economy above the ground, in positive territory, seems to be losing thrust,” Ramos said by phone from New York. “We are moving toward a scenario of stagflation -- very low or now growth and still very high inflationary pressures.”

The real was little changed at 2.2336 per U.S. dollar at 10:12 a.m. The stock and interest rate futures markets are closed today.

Sales of food, beverages and tobacco at hypermarkets and supermarkets fell 1.4 percent in April, after sliding 1.1 percent in March. Sales of furniture and appliances declined 0.1 percent in the month, after a 1.5 rise the previous month.

World Cup

“Furniture and white-line goods companies should see more concentrated sales in the second half of the year, because consumers will be focused on acquiring televisions” before the World Cup, ratings company Moody’s wrote in a March report. The tourney kicks off today in Sao Paulo. “The flow of tourists will boost regional retail sales and benefit the food and beverage industry, in particular.”

Retail sales in April rose 6.7 percent from last year, versus a median forecast for 6.2 percent expansion. The broader retail index, which includes cars and construction material, was unchanged from a year ago, the agency said today, compared with the previous month’s decline of a revised 5.6 percent.

With consumer prices rising 6.37 percent in the year through May, confidence of shoppers plummeted to its lowest level in more than five years, according to the Getulio Vargas Foundation. The central bank cited “relatively modest levels of confidence” in the minutes of their last policy meeting.

‘Less Intense’

Central bank directors held the Selic at 11 percent after 375 basis points of increases in the year through April. The bank targets inflation of 4.5 percent, plus or minus two percentage points. Their decision to hold rates even with inflation nearing the top of the target range was also informed by flagging economic activity, policy makers said in the minutes of the May 27-28 monetary policy meeting released on the bank’s website.

“The expansion of domestic activity tends to be less intense in comparison with 2013,” according to the minutes.

Brazil’s economy grew at an annualized 0.8 percent rate in the first quarter, down from 2.5 percent in 2013, the statistics institute said May 30. The World Bank yesterday lowered its outlook for Brazil’s expansion in 2014 to 1.5 percent from 2.4 percent, saying developing nations need to move faster to promote broad-based economic development.

Lowest Level

Growth during Rousseff’s first three years averaged 2.1 percent, the lowest level for a president since Fernando Collor, who stepped down in 1992. Slowing growth combined with inflation that’s chipping away at real income is prompting a slowdown in the retail sector, according to Pedro Tuesta, an economist at 4Cast Ltd.

“Retail growth has to adjust as some point, and it’s starting to adjust,” Tuesta said by phone from Washington. “That’s one of the reasons the central bank is thinking it doesn’t need to hike any more.”

An Ibope survey published June 10 put Rousseff’s re-election support at 38 percent, down from 40 percent in a previous poll released on May 22. The survey of 2,002 people was conducted between June 4 and 7 and has a margin of error of plus or minus two percentage points.

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