We break down consumer habits in the Brazilian market. Photo: FP
brazilian market consumer habits

We break down consumer habits in the Brazilian market. Photo: FP

Brazil has overcome its worst recession in at least 30 years and has posted economic growth for the past five quarters. Indicators are slowly improving but recovery remains uncertain and has left most analysts disappointed. But how do Brazilian consumers feel about the country’s economy?

Given that family expenditure accounts for over 60 percent of the country’s GDP, the perceptions and expectations of consumers are crucial in order to forecast trends and provide a more complete picture of what goes on in the world’s eighth largest economy.

In this piece, The Brazilian Report provides a roadmap to understanding Brazilians’ consumption plans and habits – which are also highly influenced by the huge social gaps among the country’s regions.

Consumer confidence is key to the Brazilian market

Brazilians are no longer as pessimistic as they were between August 2015 and May 2016, when the economy hit rock bottom. The improvement of consumer confidence, however, is not solid. That is what data compiled by Fundação Getulio Vargas, the country’s </span><a href="https://brazilian.report/2017/12/12/brazils-think-tank-boom/"><span style="font-weight: 400;">leading think tank</span></a><span style="font-weight: 400;">, shows. The Consumer Confidence Index (ICC) decreased in April and May, after reaching the highest level since the end of 2014.</span></p> <p><span style="font-weight: 400;">The situation is likely to remain uncertain in the midterm as well. The Global Consumer Survey 2017, produced by Euromonitor International, reveals that after a significant recovery in 2017 and an additional improvement in 2018, Brazilian consumer confidence is to decrease for 2019, continuing far below pre-crisis levels.</span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5209" src="https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m-1024x677.png" alt="consumer confidence level" width="1024" height="677" srcset="https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m-1024x677.png 1024w, https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m-300x198.png 300w, https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m-768x508.png 768w, https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m-610x403.png 610w, https://brazilian.report/wp-content/uploads/2018/06/export-uJg4m.png 1180w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">The breakdown of the data provided by the market intelligence company shows little momentum for a consumption boost in Brazil. Only 13 percent plan to increase their overall spending in 2018 in comparison to 2017. On the other hand, 46 percent stated they want to decrease the amount spent this year. Meanwhile, 60 percent plan to save more money in 2018 than they did in 2017, <a href="http://www.euromonitor.com/brazil">Euromonitor International</a> reports. </span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5210" src="https://brazilian.report/wp-content/uploads/2018/06/export-eAduq-1024x269.png" alt="consumer intentions brazil" width="1024" height="269" srcset="https://brazilian.report/wp-content/uploads/2018/06/export-eAduq-1024x269.png 1024w, https://brazilian.report/wp-content/uploads/2018/06/export-eAduq-300x79.png 300w, https://brazilian.report/wp-content/uploads/2018/06/export-eAduq-768x202.png 768w, https://brazilian.report/wp-content/uploads/2018/06/export-eAduq-610x160.png 610w, https://brazilian.report/wp-content/uploads/2018/06/export-eAduq.png 1180w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">A clear pattern emerges from Euromonitor International’s detailed numbers. Younger, richer and better-educated Brazilians are in general the ones willing to increase their overall spending in 2018.</span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5212" src="https://brazilian.report/wp-content/uploads/2018/06/increase-exp-957x1024.jpg" alt="increase expenses brazil" width="957" height="1024" srcset="https://brazilian.report/wp-content/uploads/2018/06/increase-exp-957x1024.jpg 957w, https://brazilian.report/wp-content/uploads/2018/06/increase-exp-281x300.jpg 281w, https://brazilian.report/wp-content/uploads/2018/06/increase-exp-768x821.jpg 768w, https://brazilian.report/wp-content/uploads/2018/06/increase-exp-610x652.jpg 610w, https://brazilian.report/wp-content/uploads/2018/06/increase-exp.jpg 1180w" sizes="(max-width: 957px) 100vw, 957px" /></span></p> <hr /> <p><span style="font-weight: 400;">On the flip side, older, poorer and less-educated Brazilians want to spend less money this year.</span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5211" src="https://brazilian.report/wp-content/uploads/2018/06/cut-expenses-989x1024.jpg" alt="cut expenses brazil" width="989" height="1024" srcset="https://brazilian.report/wp-content/uploads/2018/06/cut-expenses-989x1024.jpg 989w, https://brazilian.report/wp-content/uploads/2018/06/cut-expenses-290x300.jpg 290w, https://brazilian.report/wp-content/uploads/2018/06/cut-expenses-768x795.jpg 768w, https://brazilian.report/wp-content/uploads/2018/06/cut-expenses-610x632.jpg 610w, https://brazilian.report/wp-content/uploads/2018/06/cut-expenses.jpg 1180w" sizes="(max-width: 989px) 100vw, 989px" /></span></p> <hr /> <h3>The side effects</h3> <p><span style="font-weight: 400;">It is noteworthy that the overall percentages of respondents who plan to spend less in 2018 is higher than the ones planning to spend more. This cautious behavior towards their personal finances is a direct consequence of the harsh economic conditions the country faced in the past couple of years. The sharp rise in unemployment combined with high inflation levels &#8211; especially in 2015 &#8211; led to bills piling up in Brazilian households. </span></p> <p><span style="font-weight: 400;">It is not surprising that the default rate reached a record high last April. According to Serasa Experian, a credit research firm, 61.2 million Brazilians failed to pay at least one bill in April. On average, each of the debtors has four unpaid bills that sum BRL 4,438 per person – and BRL 271.7 billion in total. </span></p> <p><span style="font-weight: 400;">Such a conservative behavior towards consumption represents a significant blow to the country’s expected recovery. Without a potential increase in consumption, companies are likely to invest less. With limited potential for public, financial and private investment, the growth rate of the Brazilian economy is likely to remain low, as </span><b>The Brazilian Report</b> <a href="https://brazilian.report/2018/05/07/brazils-recession-crisis/"><span style="font-weight: 400;">has shown</span></a><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">In recent months, economists from the private sector have repeatedly cut their forecasts for the country’s GDP in 2018 and 2019. In January, they expect the economy to grow 2.70 percent this year and 2.80 percent in the next, according to the Focus Report. Produced by the Brazilian Central Bank, the report is a survey with dozens of economists and brings the market’s expectations for the Brazilian economy. </span></p> <p><span style="font-weight: 400;">Its last issue, released on June 15, showed the projections for economic growth have been reduced to 1.76 percent for 2018 and 2.70 percent for 2019.</span></p> <h3>A tale of two countries</h3> <p><span style="font-weight: 400;">In addition to the different consumer habits according to age, education, and income, </span><a href="https://brazilian.report/2018/05/13/racial-inequality-brazil-jobs/"><span style="font-weight: 400;">ethnicity still plays a role</span></a><span style="font-weight: 400;"> in the country’s labor market. On top of all that, the contrasting situation of Brazil’s geographic regions offers another insight into the situation of the country&#8217;s consumers.</span></p> <p><span style="font-weight: 400;">While the average </span><a href="https://brazilian.report/2018/04/30/brazil-unemployment-rate-stats/"><span style="font-weight: 400;">unemployment rate</span></a><span style="font-weight: 400;"> nationwide was 13.1 percent in the first quarter of 2018, the northern state of Amapá recorded an astonishing 21.5 percent. In the same period, the rate in the southern state of Santa Catarina was over three times lower: only 6.5 percent.</span></p> <p><span style="font-weight: 400;">When taken into consideration, the average unemployment rate since 2012 (when it began being measured under the current methodology used for the national household sample survey), the differences among Brazilian states and regions follow a pattern.</span></p> <p><span style="font-weight: 400;">In general, unemployment is higher in the Northeast and North regions and is systematically below average in most states in the South and Southeast regions. Over the past six years, the states with highest average unemployment rates were Amapá (13.5 percent), Bahia (13.1 percent) and Alagoas (12.4 percent). The percentage of unemployed people there since 2012 has been from two to three times higher than the ones registered in Santa Catarina (4.5 percent), Paraná (6.2 percent) and Mato Grosso (6.3 percent). </span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5214" src="https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o-1024x677.png" alt="brazil unemployment rate" width="1024" height="677" srcset="https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o-1024x677.png 1024w, https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o-300x198.png 300w, https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o-768x508.png 768w, https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o-610x403.png 610w, https://brazilian.report/wp-content/uploads/2018/06/export-4MN4o.png 1180w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">The state of the labor market has a direct impact on Brazilian workers’ wages. While average income over the past six years was over BRL 4,000 in the capital city of Brasilia (considering the inflation during the period), in the northeastern city of São Luis it did not reach BRL 1,700. </span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5215" src="https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB-1024x677.png" alt="average income brazil" width="1024" height="677" srcset="https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB-1024x677.png 1024w, https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB-300x198.png 300w, https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB-768x508.png 768w, https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB-610x403.png 610w, https://brazilian.report/wp-content/uploads/2018/06/export-RzYhB.png 1180w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">Such disparities are exacerbated by the uneven distribution of companies and jobs available throughout the country. </span></p> <p><span style="font-weight: 400;">The city of São Paulo, for instance, concentrates over 10 percent of the entire national GDP. Considering the income of its local workers, the sum reached BRL 13.9 billion in the first quarter of 2018. In the same period, trailing all other capitals, the workers of Rio Branco (in the state of Acre) together earned a total of BRL 227.9 million. The amount is almost 62 times smaller than the one recorded in São Paulo, according to data provided by the Brazilian Institute of Geography and Statistics.</span></p> <hr /> <p><span style="font-weight: 400;"><img class="alignnone size-large wp-image-5216" src="https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6-1024x382.png" alt="average income brazil sao paulo" width="1024" height="382" srcset="https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6-1024x382.png 1024w, https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6-300x112.png 300w, https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6-768x286.png 768w, https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6-610x227.png 610w, https://brazilian.report/wp-content/uploads/2018/06/export-4VNZ6.png 1180w" sizes="(max-width: 1024px) 100vw, 1024px" /></span></p> <hr /> <p><span style="font-weight: 400;">What this data makes very clear is that, despite the long-lasting side effects of the recession, Brazil has some strongholds of low unemployment and high incomes. Crossing this information with the sociodemographic data about consumption intention, businesses may be able to map potential opportunities to in the country.

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MoneyJun 22, 2018

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BY Mario Braga

Braga is a journalist from São Paulo. He is an Erasmus Mundus Journalism scholar pursuing his Master’s degree at Aarhus University (Denmark) and at the London’s City University.