Brazil retail sales fall in October, adding to signs of economic slowdown

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Brazil retail sales fall in October, adding to signs of economic slowdown

4:56 CAT | 14 Dec 2023

File photo: Reuters

– Retail sales volumes in Brazil slipped in October on a month-on-basis, data from statistics agency IBGE showed on Thursday, adding to a batch of recent figures that point to a slowdown in Latin America’s largest economy.

Sales fell 0.3% in October from September, IBGE said, while economists in a Reuters poll had expected an increase of 0.2%. On a yearly basis, sales grew 0.2%, compared to expectations for a 1.76% increase.

The fresh figures come a day after IBGE data showed that Brazil’s service sector, which accounts for roughly 70% of economic activity, unexpectedly fell in October. Industrial output data for the month also came in below market forecasts.

Brazil’s economy showed a strong performance early in 2023 but has been losing steam in recent months amid high interest rates, with some economists already calling on the central bank to step up the pace of its ongoing monetary easing cycle.

The figures pointing to a “struggling” retail sector “add to our view that bolder rate cuts are needed,” Pantheon Macroeconomics’ chief Latin America economist, Andres Abadia, said in a note to clients.

Brazil’s central bank on Wednesday delivered its fourth consecutive 50-basis-point interest rate cut, to 11.75%, and signaled it would keep cutting rates at that pace beyond its next meeting in January.

The bank kicked off an easing cycle in August after holding its benchmark rate at a six-year high of 13.75% for nearly a year to tame high inflation, following 1,175 basis points of hikes.

“Today’s figures coupled with the service sector figures show something that has been happening around the world: inflation is improving and activity is slowing down,” Genial Investimentos strategist Roberto Motta said.

“It’s now up to central banks to work on fine-tuning to prevent this slowdown from turning into a recession.”

Source: Reuters