By Brad Haynes
SAO PAULO Feb 13 Brazilian retail sales dropped unexpectedly in December, ending the weakest year in a decade as persistent inflation and eroding consumer confidence sapped one of the few drivers of growth in Latin America's largest economy.
Tumbling furniture and appliance sales contributed to the first drop in retail activity in 10 months, sending shares of consumer-focused companies sliding and causing some economists to lower growth forecasts.
Retail sales volumes in Brazil fell a seasonally adjusted 0.2 percent in December from November, government statistics agency IBGE said on Thursday, in contrast to the median estimate of a 0.4 percent gain among economists surveyed by Reuters.
As a result, sales grew just 4.3 percent in 2013, the weakest expansion since 2003, as tighter lending, slowing job growth and a sliding currency chilled the spending habits of Brazil's once buoyant consumers.
Citigroup analysts Marcelo Kfoury and Leonardo Porto in Sao Paulo cut their outlook for Brazilian Gross Domestic Product growth in 2014 to 1.3 percent and for 2015 to 1.8 percent from 2.0 percent after the IBGE announcement.
Lower-than-expected December retail sales followed disappointing industrial production results for the month, prompting their cut in the growth outlook, the Citigroup pair wrote in a note to investors.
Household finances are unlikely to rebound this year as rising interest rates pressure indebted consumers, wrote Neil Shearing, chief economist for emerging markets at Capital Economics, in a Thursday note regarding the "sluggish end to another disappointing year for Brazil."
The sharp slowdown underscores a cloud hanging over the Brazilian economy as President Dilma Rousseff readies her re-election campaign this year. Her critics have pointed to meager growth as evidence of failed economic policies aimed at stimulating consumption through tax breaks and cheap credit.
Sales of washing machines and motor vehicles, both of which have benefited from industrial stimulus measures, fell in December, according to the IBGE, defying expectations of a holiday rush to take advantage of expiring incentives.
The disappointing Christmas sales showed up across the board, as an association of Brazilian malls reported the weakest holiday shopping season since 2008.
Thursday's soft IBGE data triggered a fresh selloff of Brazilian retail stocks. An index of consumer companies fell 1.3 percent, adding to a more than 10 percent drop this year as it neared a 17-month low.
Cosmetics company Natura led losses with a nearly 5 percent drop in Thursday trading, the day after an earnings report showed a slower recovery than some investors were hoping for.
"We're not satisfied with the growth of Natura in the year," the company's head of investor relations, Roberto Pedote, told journalists on a Wednesday call. "We saw greater cost pressures due to the weaker currency," he added.
Only a handful of retailers escaped the drag of soft demand and rising costs in the fourth quarter, according to a Reuters survey of analysts published on Wednesday.
December's retail sales rose 4.0 percent from the year-earlier period, the IBGE added, less than the 5.1 percent median estimate in the Reuters poll.
A wider index of retail sales from the IBGE that includes the automotive and construction industries fell 1.5 percent in December from November due to plunging car sales. The wider index advanced 3.6 percent in 2013.