March 14, 2013 / 12:50 PM / 5 years ago

UPDATE 2-Brazil retail sales recover modestly in January

* Retail sales rise 0.6 pct from December

* Including cars and building materials, sales up 0.3 pct

By Silvio Cascione and Asher Levine

SAO PAULO, March 14 (Reuters) - Retail sales in Brazil expanded moderately in January, government data showed on Thursday, another sign of a gradual economic recovery in Latin America’s largest economy.

Retail sales volumes rose 0.6 percent in January from December, topping the median forecast in a Reuters poll and recovering from a decline of 0.4 percent in December, statistics agency IBGE said.

Combined with strong manufacturing growth in January, the number suggests the Brazilian economy got a kick-start in 2013 after billions of dollars in tax cuts and subsidized lending by the government of President Dilma Rousseff.

“Despite the slight loss of momentum during the fourth quarter of 2012, the retail sector remains one of the most dynamic sectors in the economy,” said Alberto Ramos, co-head of Goldman Sachs’ Latin America economic research team.

However, details of the retail sales report reminded analysts about the fragility of the economic recovery. Including sales of automobiles and building materials, the so-called broad index rose 0.3 percent from December, down from a rise of 0.8 percent the previous month.

“Consumption didn’t start the year with the type of intensity that the majority of analysts and the government itself expected. The data shows the recovery is still quite gradual,” said Gustavo Mendonca, an economist with Saga Capital, in Rio de Janeiro. He said leading indicators point to a weaker month for industrial output in February.

After two disappointing years, Brazil’s economy is expected to grow about 3 percent in 2013. However, rising inflation has prompted concerns that the central bank may raise interest rates later this year from a current record-low.

The central bank should release its IBC-Br index of economic activity on Friday, though the release date has not been confirmed. Preliminary estimates taken before the retail sales data projected an increase of 0.9 percent from December.

In January, retail sales volumes expanded in six of eight retail categories. Supermarket, food, beverage and tobacco purchases - the largest category in the IBGE report - rose 1.4 percent from December, supported by rising wages and job stability, IBGE said.

January’s retail sales climbed 5.9 percent from a year earlier, the IBGE added, more than the 5.5 percent median estimate in the Reuters poll. Forecasts ranged from a gain of 4.0 percent to 10.2 percent.

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