May data shows Brazilians are postponing purchases

Data from the Brazilian Institute of Economics at think tank Fundação Getulio Vargas suggests that the country’s economy shrank by 0.8 percent in May. It is the first monthly drop after three positive results.

According to the institute’s GDP monitor, the drop was pushed by a 2.1 percent reduction in household spending. “High inflation and sky-high interest rates have impacted families’ purchasing power, which is reflected in the consumption of non-essential goods,” says Juliana Trece, the study’s coordinator.

Consumption of durable goods fell by 0.5 percent in May, after a 1.7 percent drop in April. Brazilians also bought 1.2 percent less in semi-durable goods in May. These products are generally more expensive and paid in installments — which have become less affordable to Brazilian consumers.

Non-durable goods such as foodstuffs, meanwhile, rose 1 percent.

For the second half of the year, Ms. Trece highlights that slow consumption numbers will continue to hold the economy down. Still, top-rated investment firms surveyed by the Central Bank have elevated their GDP growth projections for the year, from 1.5 percent four weeks ago to 1.75 percent this week.