A couple of months ago, Brazilian consumers seemed to be losing spending steam. Retail sales dropped by 0.6 percent in May, and only grew by a meager 0.1 percent in June. But the sector outperformed expectations in July, with core retail sales up by 0.7 percent month-on-month. Markets had expected growth to stand at just 0.3 percent, according to a poll by research firm Refinitiv.
Economist André Perfeito says retail activity in the rolling quarter through July came 0.07 percent below the February-April stretch, but that these results are a good omen for Q3. Markets expect workers’ income to continue to rise, and for the Central Bank to promote further cuts to Brazil’s benchmark interest rate (currently at 13.25 percent).
The extended retail indicator, including auto sales, dropped by 0.3 percent — a reflection of the end of a government-sponsored program to control car prices. The end of promotional prices initiated a plunge in car sales, down 6.2 percent from June.
More good news came from the services sector, the backbone of Brazil’s economy. The sector posted 0.5 percent growth — the third consecutive month of positive results. Mr. Perfeito believes this result was “driven by the improvement in real income for workers.”
The seasonally adjusted increase surpassed the median market forecast of 0.4 percent, as polled by finance newspaper Valor.
Compared to July 2022, the services sector expanded by 3.5 percent, marking the 29th consecutive month of year-on-year growth — a clear sign of a post-Covid rebound.
Revenue from the services sector now stands 12.8 percent above the pre-pandemic level recorded in February 2020 and just 0.9 percent below the December 2022 historical peak.
The index measuring tourism activities increased by 0.7 percent month-on-month in July. Tourism now stands 6.2 percent above February 2020 levels, but a recent crisis involving the country’s biggest online travel agency could jeopardize this recovery.
It’s noteworthy that IBGE’s data indicates that the positive services sector results were identified in nine of the 12 regions surveyed.
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