Brazil November retail sales disappoint, feeding rate cut bets

RIO DE JANEIRO/SAO PAULO (Reuters) - Brazilian retail sales rose less than expected in November as fuel sales slipped, adding to signs of a fragile recovery that has some expecting another interest rate cut next month.

FILE PHOTO: People walk in front of a store on a commercial street in downtown Sao Paulo December 4, 2014. Brazilian retailers are expecting their worst Christmas season in a decade and signs are pointing to an unhappy New Year ahead. Shoppers are cautious and retail unions are ready for layoffs, adding to headaches for recently re-elected President Dilma Rousseff, whose push for fiscal austerity to win back investor confidence comes just as an economic slump hits home. Picture taken December 4, 2014. REUTERS/Paulo Whitaker (BRAZIL - Tags: BUSINESS)

Sales volumes grew a seasonally adjusted 0.6% in November from October, official statistics agency IBGE said on Wednesday. It was the seventh straight monthly increase but well below expectations in a Reuters poll, which had forecast a 1.1% rise.

Interest rate futures fell across the board in early trading, and Brazil's currency slipped to its weakest levels in more than a month, as the disappointing data reinforced bets that the central bank could extend a string of rate cuts. <0#DIJ:> BRBY

Analysts at Elite Investimentos told clients in a note that the frustrating retail data was driving the falling yield curve.

Economists have struggled in recent years to predict year-end retail sales as the adoption of “Black Friday” promotions shifts Brazilians’ holiday shopping patterns. Officials said those discounts were the main factor supporting sales activity.

“The fastest-growing sectors in November were the most sensitive to Black Friday, including furniture, electronics and home appliances as well as cosmetics,” said IBGE research manager Isabella Nunes. “If it weren’t for Black Friday, the result could have been negative.”

Sales of fuel and lubricants fell 0.3% in the month, while apparel and fabric slipped 0.2% in the month.

Nunes said economists’ disparate methodology for measuring retail sales may have been behind the errant forecasts, adding that improving consumer sentiment, modest inflation and a recovering job market should support domestic demand.

Still, after recent data showed Brazil’s worst November for services activity and industrial output in three and four years, respectively, the disappointing retail figures raised concerns that a weak economic recovery had sputtered at the end of 2019.

The central bank’s monetary policy committee, which wraps up its next rate-setting meeting on Feb. 5, has flagged the need for caution in its next moves after four aggressive cuts in a row, adding that decisions will depend on economic data.

Reporting by Rodrigo Viga Gaier in Rio de Janeiro, Camila Moreira and Paula Laier in Sao Paulo; Writing by Ana Mano; Editing by Brad Haynes and Jonathan Oatis