Brazil’s retail sales fell 0.1% in January, marking the third consecutive monthly decline. Key sectors like pharmaceuticals and food experienced significant reductions, while office supplies and fuel were exceptions. The central bank aims to curb inflation with interest rate hikes, amid concerns of weakened consumer spending despite a yearly sales increase of 3.1%.
Brazil’s retail sales volumes declined for the third consecutive month in January, according to IBGE, the government’s statistics agency. The January sales saw a slight decrease of 0.1% compared to December, marking a continuous downturn since November, amidst challenging financial conditions and weak industrial and services activity data.
In January, four out of the eight main categories surveyed by IBGE recorded declines in sales. Notably, pharmaceutical products and food sales faced significant decreases, whereas office supplies and fuel saw month-over-month increases.
To combat rising inflation, Brazil’s central bank has implemented a tightening monetary policy. Economists anticipate a third consecutive 100-basis-point increase in the benchmark interest rate, raising it to 14.25%.
On a yearly comparison, retail sales in January showed a growth of 3.1%, surpassing the expected 1.9% increase per economists surveyed by Reuters. However, Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, noted that the “apparently solid headline numbers” are largely due to mean-reversion, emphasizing ongoing weakness in consumer spending at the beginning of the year.
Brazil’s retail sector is facing a downturn, with sales declining for the third month in a row, as reported by IBGE. Tight monetary policies by the central bank are aimed at controlling inflation, while the overall economic indicators suggest a sustained deterioration in consumer spending. Despite a year-over-year sales increase, the current trends highlight underlying weaknesses in Brazil’s economy as it grapples with fiscal challenges.
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