Downward Trend in Brazil's Retail Sales And Consumption Likely Continued in May

In recent quarters, growth in Brazil's retail sales and private consumption has been flat at best compared with the normal growth of 6.3% and 3.9% seen during 2012-13. Brazil's retail sales were down -3.5% yoy in April following the -0.8% yoy (-6.6% qoq at an annualised rate) contraction in Q1 that led to an overall contraction of -0.9% yoy (-5.9% qoq at an annualised rate) in private consumption. In April, retail sales fell -0.4% mom on seasonally-adjusted basis.

"Together, April and May estimates imply that while retail sales are falling at sharper pace in Q2 as per the trend (yoy), it likely will fall at a slower pace on a sequential basis - leading to our forecast of a smaller decline in consumption in Q2. Another yoy decline of -2.3% in retail sales is expected in May, although it likely rose slightly on a seasonally-adjusted and sequential basis (0.3% mom)", estimates Societe generale.
The labour market is expected to continue deteriorating over the next few quarters and this is bound to hit wage growth, income and private consumption. Further to this, the government's proposal to keep social security spending in check - in a bid to improve fiscal balances - will also hurt consumption growth over the next several quarters. Substantial investment and growth momentum will be needed to reverse the current downward trajectory in private consumption, suggests SocGen.

Source : FXPrimus

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