Brazilian retail sales post record performance for January

Despite the multiple signs of an economic slowdown, Brazilians remained willing to spend money on all sorts of goods in January. Retail sales rose 3.8 percent in January from December — and 2.6 percent year-on-year. It was the biggest jump on record for the first month of the year.

Seven out of eight segments posted growth in January. Notably, the clothing segment saw sales jump 27.9 percent following four months of decline. Only the sale of pharmaceutical and medical products shrank in January, down 1.2 percent. 

After an underwhelming Black Friday and Christmas season for retailers, sales soared thanks to post-holiday sales. 

Retail data can be volatile from one month to the next and dependent on seasonality, but the sector had not registered a positive result since October 2022. 

“It is an important result as retail was coming from results that were negative or stable,” said Cristiano Santos, a research manager at the Brazilian Institute of Geography and Statistics (IBGE).

According to Mr. Santos, the volume of retail sales is growing but still remains 2.9 percent below the October 2020 peak. 

The retail sector has suffered as a result of Brazil’s monetary tightening process. Since rates began being raised in March 2021, the country’s benchmark interest rate has jumped from 2 to 13.75 percent. In a country where consumers rely heavily on credit, higher borrowing costs take a toll on consumer behavior.

Retail sales showed successive drops in 2022, closing the year with negative results of 0.7 and 2.8 percent in November and December, respectively.

Gustavo Sung, chief economist at Suno Research, sees the January data as “quite positive” but remains cautious on retail, as the overall economy is taking a dip while indebtedness and household default rates go up.

The Luiz Inácio Lula da Silva administration has taken measures to foster consumption as a way to jolt the economy and keep demand higher. 

“The government moved to increase the minimum wage, launch a debt-renegotiation program, heighten the income tax exemption threshold, and expand the Bolsa Família cash-transfer program,” Mr. Sung notes. “All of these are actions aimed at making retail more dynamic.”