Brazil's consumption outlook remains dim despite a mild spur in Q4

Brazil's retail sales growth has averaged 0.4% yoy since mid-2014 and while sales growth in Q4 was better than that in Q3, it was largely pulled up by 2.2% yoy growth in October. 

In general, retail sales were nearly flat over the past three quarters and overall consumption growth is decelerating.  Although consumption growth improved somewhat in Q4 due to significant fiscal expansion and minor improvements in credit and wages, the downward trajectory is quite clear. 

In detail, the bulk of the recent weakness in sales growth could be seen in durables, such as vehicles, construction materials and household appliances. 

There is a considerable downside risk to sales growth now that the unemployment rate is 0.8pp higher (at 5.9%) than it was a year ago and wage growth has begun to slow. 

"The sharp rise in inflation and unemployment suggests sales growth likely fell to -0.9% yoy (-1.0% mom) in February. Given the continued deterioration in the labour market and outlook for social security benefits, our forecast of 0.9% consumption growth in 2015 could be slightly optimistic", said Societe Generale in a report on Tuesday.