RIO DE JANEIRO (Dow Jones)--Brazilians continued their spending spree in July, shrugging off higher interest rates and stiffer credit terms to keep domestic demand in Latin America's largest economy heated.
Retail sales in July climbed a seasonally adjusted 1.4% from June, the Brazilian Institute of Geography and Statistics, or IBGE, said Tuesday. July sales were also up 7.1% from July 2010, and have advanced 8.5% over the past 12 months. The advance was greater than the median forecast of analysts polled by the Estado news agency, which projected a sales gain of 1.03% in July versus June. The forecasts fell within a range between growth of 0.3% and 1.6%.
Record low unemployment, higher wages and greater access to credit have allowed Brazilians to go on a spending spree since mid-2009, when Latin America's largest economy quickly emerged from a brief recession. The strong domestic demand, however, created inflationary pressures that has the Brazilian Central Bank on edge.
The central bank implemented five-consecutive interest rate hikes to start 2011 in an effort to tamp down domestic demand and contain rising prices. In late August, the bank reversed course and reduced the benchmark Selic base interest rate by a half-percentage point to 12.0% amid concerns about global economic growth.
The bank pointed to debt troubles in Europe and sluggish growth in the developed economies as tilting monetary policy toward sustaining domestic activity rather than containing price pressures, despite inflation running at a six-year high through August. Inflation as measured by the official IPCA consumer price index was running at an annual rate of 7.23% through August, well above the ceiling of the government's target range of 4.5% plus or minus two percentage points.
Despite recent data showing stagnant industrial production and a softer pace to growth in Brazil, the retail sales figures show that demand remained strong, Goldman Sachs said in a research report. The July sales tally got the third quarter off to a "very good start," the firm said. "Demand continues to expand at a good pace, supported by a very tight labor market, still generous credit conditions and high levels of consumer confidence," Goldman Sachs said.
In the month-on-month comparison, the IBGE said that eight of the 10 categories measures posted sales growth. Sales of furniture and electric domestic goods advanced 4.1%, while the broad segment that includes supermarkets, food, beverages and tobacco rose 1.6%. Sales of office and communications equipment, however, plummeted 12.5% month-on-month, the IBGE said.
All 10 of the categories measured in the year-on-year comparison registered sales growth in July, including a 21.4% jump in furniture and domestic electronics sales, the IBGE said. Sales of office, technology and communications equipment surged 15.9% year-on-year, while supermarket, food, beverage and tobacco sales climbed 4.5% in the period.
Source: http://online.wsj.com
Retail sales in July climbed a seasonally adjusted 1.4% from June, the Brazilian Institute of Geography and Statistics, or IBGE, said Tuesday. July sales were also up 7.1% from July 2010, and have advanced 8.5% over the past 12 months. The advance was greater than the median forecast of analysts polled by the Estado news agency, which projected a sales gain of 1.03% in July versus June. The forecasts fell within a range between growth of 0.3% and 1.6%.
Record low unemployment, higher wages and greater access to credit have allowed Brazilians to go on a spending spree since mid-2009, when Latin America's largest economy quickly emerged from a brief recession. The strong domestic demand, however, created inflationary pressures that has the Brazilian Central Bank on edge.
The central bank implemented five-consecutive interest rate hikes to start 2011 in an effort to tamp down domestic demand and contain rising prices. In late August, the bank reversed course and reduced the benchmark Selic base interest rate by a half-percentage point to 12.0% amid concerns about global economic growth.
The bank pointed to debt troubles in Europe and sluggish growth in the developed economies as tilting monetary policy toward sustaining domestic activity rather than containing price pressures, despite inflation running at a six-year high through August. Inflation as measured by the official IPCA consumer price index was running at an annual rate of 7.23% through August, well above the ceiling of the government's target range of 4.5% plus or minus two percentage points.
Despite recent data showing stagnant industrial production and a softer pace to growth in Brazil, the retail sales figures show that demand remained strong, Goldman Sachs said in a research report. The July sales tally got the third quarter off to a "very good start," the firm said. "Demand continues to expand at a good pace, supported by a very tight labor market, still generous credit conditions and high levels of consumer confidence," Goldman Sachs said.
In the month-on-month comparison, the IBGE said that eight of the 10 categories measures posted sales growth. Sales of furniture and electric domestic goods advanced 4.1%, while the broad segment that includes supermarkets, food, beverages and tobacco rose 1.6%. Sales of office and communications equipment, however, plummeted 12.5% month-on-month, the IBGE said.
All 10 of the categories measured in the year-on-year comparison registered sales growth in July, including a 21.4% jump in furniture and domestic electronics sales, the IBGE said. Sales of office, technology and communications equipment surged 15.9% year-on-year, while supermarket, food, beverage and tobacco sales climbed 4.5% in the period.
Source: http://online.wsj.com
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