Brazilian core retail suffers third negative result in a row in August

Brazilian core retail reached its lowest level of the year in August. The volume of sales saw a subtle 0.1-percent drop, according to official data. The figure was better than market expectations, but was the sector’s fourth decline in a row and the third consecutive negative result, meaning retail has shrunk 2.5 percent in the last three months. 

The sector is still in the green in comparison to August of last year, and in a year-to-date analysis. However, over the 12-month period, it has dropped 1.4 percent.

Five of the eight activities surveyed posted positive numbers in August, with supermarkets and food (+0.2 percent) having the biggest effect on the overall result.

“This month, the participation of the supermarkets’ group was very clearly an anchoring factor, holding the variation very close to zero. The activity weighs about 50 percent on the global index. Pharmaceutical articles also contributed in terms of weight,” explained Cristiano Santos, the survey manager.

Even though inflation has started to ease, consumer prices remain very high while entry-level wages are on a downward trend. Moreover, recent household consumption has concentrated more on services than consumer goods. 

Mr. Santos gave a special mention to the fuels and lubricants segment, which grew 3.6 percent in August, after soaring 12.6 percent in July, still a direct result of the government’s moves to cap state taxes on fuel, causing prices to drop. 

“The reduction in fuel prices led to a 4.5-percent drop in nominal revenue, which was offset by a 3.6 percent rebound in volume. In July, this rebound was greater, because the price reduction was also greater,” he said. 

Fuel prices dropped more than 14 percent in the July inflation reading. And in August’s IPCA consumer price index, they fell by almost 11 percent.