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
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.