Brazil Retail Sales Beat All Forecasts on Black Friday Deals

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Brazil’s retail sales in November rose more than all economists estimated, buoyed by Black Friday promotions as the central bank increases borrowing costs in the world’s second-biggest emerging market.

Sales jumped 0.9 percent after a revised 1.3 percent increase in October, the national statistics agency said in Rio de Janeiro. That was above every estimate from 37 economists surveyed by Bloomberg, whose median forecast was for a 0.2 percent increase.

President Dilma Rousseff is struggling to revive consumer confidence after the cost of living surged last year and benchmark borrowing costs rose to the highest level since 2011. Led by Finance Minister Joaquim Levy, her new economic team is implementing policies designed to help slow inflation and boost growth.

“It’s certainly encouraging,” said Neil Shearing, the chief emerging-markets economist at London-based Capital Economics Ltd. “The consumer side is stabilizing and showing some signs of actually picking up. Retail sales grew for the fourth straight month, but also the broad retail number that includes some big-ticket items like car sales was even stronger.”

Swap rates on the contract due January 2017 were unchanged at 12.47 percent at 10:41 a.m. local time. The real strengthened 0.7 percent to 2.6248 per U.S. dollar.

Black Friday

Sales of food, beverages and tobacco at hypermarkets and supermarkets fell 0.8 percent after a revised 1.9 percent increase in October. That was offset by sales of furniture and appliances that advanced 5.4 percent after a revised 0.8 percent rise the previous month. Sales of apparel jumped 3.4 percent after a revised 2.3 percent rise.

Furniture, appliances and apparel “showed greater growth than all prior months of the year, in part because of Christmas sales,” Cristiano Oliveira, chief economist at Banco Fibra SA in Sao Paulo, said by telephone. “Now in Brazil in the last week of November we have Black Friday promotions and sales were influenced by that, primarily in those items.”

Black Friday sales exceeded estimates, Flavio Rocha, CEO of apparel retailer Lojas Riachuelo SA, told reporters in Sao Paulo Dec. 4.

The broader retail index, which includes cars and construction materials, rose 1.2 percent. Retail sales in November unexpectedly rose 1 percent from the previous year, versus a median forecast for a 0.4 percent decrease. Broad retail sales declined 2.7 percent from a year ago, versus a median estimate of a 3.5 percent drop.

Contain Spending

Levy, the former head of asset management at Banco Bradesco SA, has pledged to contain spending to help the central bank damp above-target inflation. He says the measures eventually will contribute to reviving the economy, which emerged from its first recession since 2009 in the third quarter by posting growth of 0.1 percent.

Policy makers have raised the key interest rate twice since Rousseff won re-election in October, to 11.75 percent. Investors are betting the central bank board will increase borrowing costs by a half point to 12.25 percent when it meets again next week, swap rates show.

“While inflation tends to show resistance in the short term, the central bank reiterates that it will do what’s necessary so that inflation this year enters into a long period of decline, which will bring it to the 4.5 percent target in 2016,” bank President Alexandre Tombini said in a statement Jan. 9.

Tame Inflation

Tighter monetary policy has yet to tame inflation, which at 6.41 percent last year was the fastest since 2011. Policy makers target an annual rate of 4.5 percent, plus or minus two percentage points.

With inflation undercutting purchasing power, Brazilians in 2014 slowed consumption and began to save more, according to analysis by market research firm Ipsos and Rio’s commerce federation Fecomercio-RJ. The personal loan default rate has stabilized at its lowest since 2011. Consumer confidence in December rebounded from a nearly six-year low, according to the Getulio Vargas Foundation.

“The expectation for the coming months is for moderate retail sales growth amid low consumer confidence, high level of family indebtedness and reduction of credit,” MCM Consultores Associados said in a note to clients today. “All together, the November result shows we will have a fourth quarter rate of sales better than the one observed in the prior quarter.”

Brazil edged out of recession in the third quarter, growing 0.1 percent. Consumer spending dropped 0.3 percent, failing to grow for the third straight period. The MSCI index of Brazilian consumer-discretionary stocks, which include Lojas Americanas SA and Lojas Renner SA, has lost 11.4 percent this year after rising 3.1 percent in 2014.

(Updates to add economist comment in seventh paragraph.)
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