Brazil's retail sales likely to remain in negative zone

Brazil's retail sales data is scheduled to release on 12th August. The country posted negative growth of -0.9% mom and -4.5% yoy in June. 

In recent quarters, growth in retail sales and private consumption has decelerated sharply compared with the normal growth of 6.3% and 3.9% seen during 2012-13 (and much worse compared with cyclical peaks of 8.8% and 5.6% observed in 2010-11). Sadly, the shape and outlook of the labor market in particular and the overall economy in general offer little hope of a near- to medium-term revival in consumption. In fact, the labor market is expected to continue deteriorating over the next few quarters and this is bound to hit wage growth, income and private consumption. 

 Societe Generale expects a nearly similar pace of decline in retail sales in June on an annual and sequential basis (for the seasonally adjusted index), like last month. 

The bank says, "Retail sales likely fell -4.1% yoy in Q2 vs -0.8% in Q1. On a sequential basis too Q2 growth at -8.9% qoq (annualized) is likely to be worse than that in Q1 (-7.7% qoq annualized). Based on these estimates our Q2 consumption forecast of -3.7% qoq (annualized) appears slightly optimistic. This is one of the reasons we continue to keep our Q2 growth forecast at -7.9% qoq (annualized), although the supply side economic activity index likely puts it at -6.4% on our June forecast."