The volume of retail sales grew 0.8 percent in March, exceeding the market’s expectations of a 0.8 percent contraction and accumulating a positive variation of 2.4 percent in Q1 2023, despite a drop in February. In the 12 months to March, the volume of retail sales increased 1.2 percent.
March’s positive result was not spread among all retail segments — only three of the eight categories surveyed posted higher sales results in March, while in January and February, six and seven sectors had registered an increase in sales volume.
Sales in grocery stores, which account for 40 percent of core retail, were stable in March at 0 percent. Pharmaceuticals, the second biggest segment in retail, rose 0.7 percent. IT equipment and supplies grew by 7.7 percent, and furniture sales rose by 0.3 percent. Meanwhile, clothing sales dropped 4.5 percent, and the other goods category fell 2.2 percent.
Cristiano Santos, research manager at the Brazilian Institute of Geography and Statistics (IBGE), says that it is important to note that the March data shows the retail sector is indeed growing in early 2023, following results in February that indicated stability.
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, with no indication from the Central Bank that it will be lowering rates any time soon.
In a country where families rely heavily on credit, higher borrowing costs take a toll on consumer behavior. The Luiz Inácio Lula da Silva administration has taken measures to foster consumption as a way of jolting the economy and keeping demand higher.
Lula is an outspoken critic of central banker Roberto Campos Neto’s hawkish monetary policy, which harms Brazilian economic production capacity. Recently, the president accused Mr. Campos Neto of not being committed to Brazil, “but to the [former Jair] Bolsonaro government” and “to those who like a high interest rate” instead.
However, the latest positive results of Brazil’s main economic sectors — services, retail, and manufacturing — may support Mr. Campos Neto’s view that the country still needs high interest rates in order to cool down inflation through the deceleration of economic activity.
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