September 12, 2017 / 1:26 PM / in 10 months

Brazil retail sales growth slows to a halt in July

SAO PAULO (Reuters) - Retail sales growth in Brazil slowed to a halt in July as a tax hike hit fuel sales, suggesting a recent pickup in consumer spending may be more uneven than previously expected.

FILE PHOTO: A person shops for dried products at the Municipal Market of Sao Paulo in downtown Sao Paulo, Brazil September 6, 2017. REUTERS/Paulo Whitaker/File Photo

Sales volumes excluding cars and building materials were flat from the previous month after seasonal adjustments, government statistics agency IBGE said on Tuesday.

Economists had expected retail sales to increase 0.1 percent in July, according to the median forecast in a Reuters poll. Monthly growth in June was revised to 0.9 percent, down from 1.2 percent reported previously.

Fuel and lubricant sales were the biggest drag in July, falling 1.6 percent, hurt by a mid-month tax hike on gasoline, diesel and ethanol.

Vehicle sales, which are included in a broader measure of retail sales, slipped 0.8 percent.

The July data snapped a string of stronger-than-expected economic figures fueling optimism about Brazil’s recovery from its deepest recession in more than a century.

Household spending lifted second-quarter gross domestic product (GDP) growth above analyst expectations, leading forecasters to raise their estimates for economic expansion in 2017.

A sharp slowdown in inflation has boosted consumers’ purchasing power and allowed the central bank to cut interest rates to a four-year low.

In a report, economists at JPMorgan Securities said consumer spending should continue to recover in coming months despite the weaker-than-expected July retail figures.

“Our call is that consumption will underpin and lead to a sustainable GDP recovery in the next quarters,” they wrote.

Retail sales grew 3.1 percent in July from a year earlier, lagging the survey’s 3.5 percent forecast.

Earlier on Tuesday, the central bank acknowledged in the minutes from its last monetary policy meeting that the economic recovery was set to continue at a gradual pace, paving the way for a reduction in the pace of rate cuts.

Reporting by Bruno Federowski; Editing by W Simon

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