| SAO PAULO
SAO PAULO The pace of retail sales in Brazil probably picked up in December, sustaining hopes for a gradual economic recovery in 2013 but feeding concern about inflation, a Reuters poll showed.
Retail sales volumes are expected to have expanded 0.8 percent in December from November on a seasonally adjusted basis, accelerating from 0.3 percent growth the month before, according to the median forecast of 27 analysts.
Strong consumer spending has been Brazil's main source of economic growth as manufacturers struggle with weak global demand and soaring labor costs. December's expected solid performance, underpinned by record-low unemployment, lays the groundwork for a gradual economic recovery this year, analysts said.
"Although the fourth quarter was weaker than we expected, we kicked off this year with some good news. We maintain our forecast for 2.5 percent economic growth this year," analysts at local research firm Rosenberg & Associados wrote in a note.
Brazil's economy, Latin America's largest, is expected to have grown around 1.0 percent last year. Rosenberg & Associados are among the most bearish research firms on Brazil's 2013 growth prospects, with the median of forecasts in a weekly central bank poll standing at 3.08 percent.
Accelerating retail sales likely offset stagnant industrial output in December, leading to a 0.4 percent expansion of the central bank's IBC-Br economic activity index, according to forecasts from 18 analysts. That would be the same rate of growth seen in November.
Compared with December 2011, sales volumes likely grew by 7.35 percent, the median of 24 forecasts showed, slowing from an annual rise of 8.4 percent in November.
Recent volatility of Brazilian retail sales data has also made some economists more cautious with forecasts. Estimates for month-on-month sales growth in December ranged from 0.2 percent to 1.6 percent, while estimates for the year-on-year gain varied from 6.0 percent to 9.6 percent.
Strong household spending has also pushed up consumer prices in Brazil, one reason why inflation remains near the 6.5 percent ceiling of an official target.
The central bank, which cut interest rates to a record low of 7.25 percent last year to revive economic growth, said in the minutes of its latest rate-setting meeting that it sees growing risks of a mismatch between supply and demand in some sectors.
Brazilian statistics agency IBGE will release December retail sales data on Tuesday at 9 a.m. (1200 GMT).
(Reporting by Silvio Cascione; Editing by James Dalgleish)