May 13, 2020 / 1:06 PM / 14 days ago

UPDATE 2-Fall in Brazil retail sales limited by demand for social isolation essential items

(Changes headline, adds quote)

By Jamie McGeever

BRASILIA, May 13 (Reuters) - Brazilian retail sales fell far less than expected in March as surging sales of essential items at supermarkets and pharmacies offset a steep decline across most other areas of the economy as the coronavirus crisis deepened.

Sales fell 2.5% from the previous month, statistics agency IBGE said on Wednesday, the biggest drop since late 2018 but far less than the 7.7% decline forecast in a Reuters poll of economists.

The figures were heavily skewed by the social isolation and quarantine measures that began to be implemented in the second half of March. Sales in most sectors slumped, but demand for essentials like food and drink, and pharmaceutical items jumped.

“March was hugely affected by social isolation in some of the most important and populous cities from the second half of the month onward,” said IBGE survey director Cristiano Santos.

“These cities deemed hyper and supermarkets and pharmaceutical products as essential activities, while stores and shopping centers in other cities closed their doors,” he said.

The 2.5% fall in March was biggest decline in any March since 2003 and six out of the eight sectors covered in the IBGE survey showed a fall in sales. Some 44% of companies cited coronavirus as the main reason for the decline.

On an annual basis, sales fell 1.2% in March from the same month last year, the first fall in a year but also much less than the 6.0% slump anticipated in the Reuters poll.

On a wider measure, however, including construction materials, vehicles and auto parts, retail sales slumped 13.7% in March from February and 6.3% from the same month a year earlier, IBGE said.

But hypermarkets and supermarkets, which include food, drink and tobacco, showed a 14.6% rise in sales, while sales of pharmaceutical, medical, orthopedic, perfumery and cosmetics items rose 1.3%.

Alberto Ramos, head of Latin American research at Goldman Sachs, noted that retail sales were 7.5% below the peak from October 2014, and the wider measure was 20.1% below the peak from August 2012.

“We expect an even deeper hit to retail sales in the second quarter, driven by social distancing protocols and other measures to restrict movement and activity,” he wrote in a note. (Reporting by Jamie McGeever; Editing by Andrew Heavens and Steve Orlofsky)

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