Brazilian retail sales likely fell in August, consumption unlikely to stabilize in near-term

Consumption in Brazil is not expected to stabilize in the near term. The rate of contraction in retail sales has slowed slightly in the last few months as sentiment has rebounded on the economic outlook and the considerably contraction in the private consumption has made a base effect that would ultimately help consumption bottom out at some point of time.

However, a more robust outlook of consumption appears a tall order at this stage of the cycle due to the persistent decline in labor market, pressure on the government’s social sector spending and high interest rates, according to Societe Generale.

In August, Brazilian retail sales are likely to have dropped 4.8 percent year-on-year and 1 percent sequentially, added Societe Generale. It would need considerable investment momentum to reverse the downward path of the employment and consumption. It is a long way to reach that stage, stated Societe Generale.