Brazil’s strong retail results don’t tell the full story

In the month of May, we saw the reopening of some economies in some Brazilian states. Even though this process has been carried out gradually, this easing of social isolation measures has been reflected in economic indicators, especially those relating to the retail sector. The results released in May were considerably high, though not enough to cancel out the negative result accrued during the first months of the pandemic. The points to be examined are credit to small and medium-sized enterprises (SMEs), unemployment trends, and the appetite for consumption. After the paralyzation of nearly all trade, the results seen upon reopening ended up being very strong indeed.

To corroborate the strong drop, according to the chart below, the current volume of monthly sales in the retail trade is very close to that of April 2010.

For the month of May, expanded retail trade — which includes construction and vehicle sales — grew 19.6 percent compared to April 2020, but fell 14.9 percent in relation to the same month last year. Therefore, while immediate growth was very significant, it came from a very low baseline. Sales of construction...