Brazil August Retail Sales Fall More Than Economists Forecast

  • Consumer confidence has plummeted and is dragging on GDP
  • Finance Minister says fiscal adjustment will trigger growth

Brazil’s retail sales in August tumbled more than economists estimated as inflation and unemployment drag down confidence in Latin America’s biggest economy.

Sales fell 0.9 percent after a revised 1.6 percent decline in July, the national statistics agency said in Rio de Janeiro. That was worse than the median 0.6 percent drop estimated by 35 economists surveyed by Bloomberg.

The seventh straight drop comes as the lowest consumer confidence in more than a decade and rising unemployment keep families from shopping. Brazilians are also coping with the highest interest rates since 2006, aimed at taming above-target inflation. Brazil’s government is working to shore up fiscal accounts, which Finance Minister Joaquim Levy said will help restore demand.

Swap rates on the contract due January 2017 rose one basis point, or 0.01 percentage point to 15.81 percent at 9:19 a.m. local time. The real strengthened 0.4 percent to 3.8793 per U.S. dollar.

Sales of food, beverages and tobacco at hypermarkets and supermarkets fell 0.1 percent after a 1.5 percent fall in July . Vehicles and auto parts sales dropped 5.2 percent.

Brazil’s consumer confidence in September reached its lowest level ever recorded by the Getulio Vargas Institute since the survey began a decade earlier. Confidence of retailers is dropping, too.

Uncertainty is prompting people to delay purchasing decisions and avoid risks, and they will remain “very cautious” until some sort of political agreement is reached to implement fiscal measures, Levy said at an event in Lima on Saturday.

“After you get the fiscal solved, you get the natural coming back of demand,” he said. “What you’re going to see is the recovery of the economy with more credit and lower interest rates. ”

Working to slow consumer price increases to the official target of 4.5 percent by the end of 2016, the central bank raised the benchmark Selic in seven consecutive meetings, bucking the global trend of monetary easing.

Policy makers ended the tightening cycle at their last monetary policy meeting and have repeatedly signaled their intent to hold there for a prolonged period. With annual inflation of 9.49 percent in September, and economists surveyed by the central bank forecasting it will slow only to 6.05 percent next year, the market is betting on additional rate increases.

Retail sales in September fell 6.9 percent from the previous year, versus a median forecast for a 5.8 percent decline. That follows a revised 3.9 percent slide last month.

The broader retail index, which includes cars and construction materials, dropped 9.6 percent from a year ago, versus a median estimate for a 8.6 percent fall.

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