The disappointing real retail sales and consumption numbers

BRAZIL ECONOMICS - Report 17 Sep 2018 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

One of the hopes for stronger recovery in 2018 was the acceleration of household consumption in 2017. More specifically, the hope was that the combination of lower real interest rates and reduced household debt service ratios would lead to maintenance, or even elevation, of the quarterly growth rates of real retail sales and household consumption. The beginning of 2018 was marked by deceleration, influenced by the weak performance of the job market. Although the unemployment rate has continued to fall slightly, the details in this market are not encouraging, such as the high level of informality and the growing contingent of discouraged workers. In July, not only did real retail sales fell short of expectations again, reinforcing the perception that household consumption is stagnant, real revenue fell in the service sector, which is labor intensive. The loss of strength of household consumption reinforces indications that GDP will not grow more than 1% in 2018.

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