Brazil's Retail Sales Fall Most on Record in 2015

  • Retail sales fell more than expected by economists in December
  • Appliances and furniture sales dropped 8.7% in the month

Brazil’s retail sales fell more than forecast in December, bringing 2015 consumption to a record low as a prolonged recession eats into Brazilians’ purchasing power.

Sales fell 2.7 percent after a revised 1.6 percent increase in November, the national statistics agency said Tuesday. That was more than the median estimate for a 2.5 percent decline from 37 economists surveyed by Bloomberg. Sales fell 4.3 percent throughout 2015 -- the largest annual drop for the series that began in 2001.

A recession projected to last two years has already shaved more than 1.5 million formal jobs from the economy, as double-digit inflation further erodes purchasing power. Those factors have led to three straight quarters of drops in consumer spending, which accounts for almost two-thirds of economic activity. The government is seeking to revive economic activity with stimulus lending from state-owned banks.

“It’s unlikely that retail sales will emerge from their slump for some time -- they’re likely to contract this year and possibly 2017,” Edward Glossop, an emerging markets economist with London-based Capital Economics. “Credit easing measures that were announced should help, but monetary policy will remain tight.”

The real dipped 0.2 percent to 4.0067 per U.S. dollar at 9:56 a.m. local time. Swap rates on the contract due January 2017 fell 9 basis points to 14.31 percent.

Sales of food, beverages and tobacco products at hypermarkets and supermarkets fell 1 percent in December. Also dragging down the monthly figure were furniture and appliances sales, which sank 8.7 percent, reflecting holiday shopping in November amid Black Friday deals, according to Thais Zara, chief economist at Rosenberg Consultores Associados. Zara highlighted that furniture and appliance sales fell more than 14 percent for three consecutive months in a year-on-year comparison.

“The sign is clearly very bad for appliances and furniture,” Zara said by phone from Sao Paulo. “The trend is for that to continue through 2016. It’s a very difficult trajectory for that segment that is highly dependent on credit.”

Broad retail sales, which include car parts and construction materials, plunged 11 percent from the same month the prior year.

Amid the downturn in demand, Whirlpool Corp. continues to turn profits in Brazil but has seen its margins on appliances “hurt very badly,” Chairman and Chief Executive Officer Jeff Fettig said in an earnings call Jan. 29. While Brazil’s consumer confidence remains close to its historic low, it lately has registered an uptick and in January reached its highest level in five months.

Tuesday’s results are the final component of the statistics institute’s gross domestic product figures for the fourth-quarter and full-year 2015. It will release the official GDP data March 3.

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