June 10, 2011 / 12:31 PM / 8 years ago

UPDATE 2-Brazil economy shows new signs of slowdown

 * Brazil retail sales slip in April, 1st time in 1 year
 * Data come as credit, industrial output also slowing
 * Monthly inflation rate expected to fall in coming months
 (Recasts, adds details, quotes)
 By Luciana Lopez and Brian Winter
 SAO PAULO, June 10 (Reuters) - Brazil's booming economy
showed new signs of a moderate slowdown on Friday, as consumers
and factories responded to tighter credit, easing worries about
 Retail sales unexpectedly slid 0.2 percent in April from
March, the first such decline in a year, according to the IBGE
statistics institute. Employment in industry also fell 0.1
percent on a monthly basis, the IBGE said.
 Friday's reports were the latest in a series of economic
data to suggest that Latin America's largest economy is slowing
to a more sustainable rate of growth, following a prolonged
government push to bring inflation back within the target range
and prevent bubbles from developing.
 Officials have raised interest rates 1.50 percentage points
this year, including a rate increase on Wednesday, and have
passed other measures to curb credit, including limits on how
much banks can lend out.
 While some areas such as Brazilian real estate continue to
expand at a robust pace, other recent data, such as a tumble in
April industrial production, a slowdown in consumer credit, and
a slower pace of inflation in May, suggest that the credit
measures are taking effect.
 "There's definitely a moderate slowdown underway," said
Paul Biszko, a senior emerging markets strategist with RBC. "I
would call it a soft landing so far."
Brazilian interest rates:     r.reuters.com/sej89r 
Graphic on economic growth:   r.reuters.com/tux38r
 However, Biszko warned the government isn't out of the
woods yet. "The key thing is that they don't abandon their
tighter monetary and fiscal policies too soon."
 Mexico, Peru and Colombia have also shown signs recently of
progress in their fight against inflation. Several countries
around Latin America have tightened monetary policy this year,
and slowing activity in China -- the top buyer of the region's
commodities -- may also help contain prices.
 A Reuters survey of 17 economists had foreseen an increase
of 0.3 percent in Brazil's April retail sales.
 The central bank has raised interest rates four times this
year, most recently to 12.25 percent from 12 percent on
Wednesday, to brake above-target inflation. Analysts say
another rate increase is likely in July.
 President Dilma Rousseff has also promised to cut 50
billion reais ($31.5 billion) from the budget to cool the
economy after public spending bloated last year ahead of theOctober elections.
"Parts of the economy are significantly overheated," such as
the real estate sector, and the government has more to do to
turn an expected 4 percent expansion this year sustainable over
the long term, Biszko said.
 While recent inflation indexes have slowed month over
month, the 12-month rate is expected to pick up from its
current 6.55 percent because last year's price increases were
small at this time of year. The central bank is targeting
inflation of 4.5 percent plus or minus 2 percentage points this
 But with some commodity prices dipping and major world
economies still uncertain, regional economies have begun
slowing, and some policy-makers are easing up on the brakes.
 In Peru, the central bank held interest rates after five
months of tightening on Thursday. Peru's consumer price index
fell 0.02 percent in May, its first drop since October.
 For the IBGE's retail sales report see:
 ($1=1.585 reais)
 (Reporting by Rodrigo Viga Gaier and Brian Ellsworth in Rio de
Janeiro; Writing by Luciana Lopez; Editing by Theodore

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