Retail Trade’s Unsteady Outlook

CEIC Brazil Data Talk: Brazil’s Retail Trade Volume index for hypermarkets and supermarkets improved marginally during May 2013 with 2.09% year-on-year growth in the seasonally adjusted index; it had previously declined for two consecutive periods, by 0.43% and 0.46% during March and April 2013 respectively. The associated seasonally adjusted retail value index, meanwhile, continued to see a near-unbroken streak of double-digit growth evinced since early 2007, although up until now this has been largely due to price inflation rather than a persistent improvement in retail trade. The improvement in the retail trade volume index for hypermarkets and supermarkets in May is attributable to slower food price inflation, hence boosting sales. The food component of the consumer price index (CPI) grew by 12.80% during June 2013, slower than the 13.99% and 13.53% rises in April and May 2013 respectively; the food and beverage component of the CPI constitutes around 23-25% of the overall reference basket of goods and services. Overall, the retail trade volume index has continued to display strong seasonally-adjusted growth, with a 4.16% year-on-year rise in May 2013, while the corresponding retail trade value index grew by 13.06%. Strong growth has been seen in retail sales of pharmaceuticals, cosmetics and perfumes (8.67%) and fuel and lubricant products (8.86%). The increase in the supermarket retail sales were similarly captured by the National Sales Index of the Brazilian Association of Supermarkets (ABRAS) which saw a modest 4.28% real growth in May 2013 after declining by 3.84% during the previous month. However, despite the encouraging improvements in hypermarket and supermarket retail trade, and indeed overall retail trade, its sustainability must be questioned. In particular, Brazil’s weaker labour market outlook and poor consumer confidence have been causes for concern. The unemployment rate has risen for six consecutive months since January 2013 to 6.00% as of June 2013, with Salvador seeing an unemployment rate as high as 8.80%. At the same time, consumer sentiment has steadily deteriorated since September 2012. As of July 2013, the consumer confidence index had declined to a seasonally-adjusted net balance of 108.3 (down by 10.94% year-on-year and 4.07% month-on-month), with consumers becoming increasingly pessimistic of both the present state and their expectations of the Brazilian economy. Given the recent nationwide protests that struck Brazil during June, analysts are bracing for a negative impact on overall retail trade, potentially reversing some of the gains observed in supermarket retail sales in May 2013. Higher inflation results reported during June 2013 (6.70% year-on-year, breaching the Central Bank’s inflation target range of 4.5±2%) may continue to place further pressure on retail trade though the lower growth in the food and beverage inflation index component may help (declining from 13.53% in May 2013 to 12.80% in June 2013) partially ameliorate some of the worst effects of rising inflation and the protests. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. By Bruno Vasconcelos - CEIC Analyst Back to Blog
7th August 2013 Retail Trade’s Unsteady Outlook