Central-West and South, already with higher income, come out ahead and grow double digits in the year
08/08/2023
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Among the ten states with the lowest estimates of increase in consumption potential, six reported the worst indices of inequality — Foto: Brenno Carvalho/Agência O Globo
Brazil’s consumption potential, which comprises all the money in circulation for spending, is faltering again after the brief recovery at the beginning of the pandemic. Reaching almost R$ 4.8 trillion annually, consumption potential shows a drop in real terms, when discounting inflation, and still feels the weight of maintaining high interest rates in the economy, which reduces purchasing power.
Economists and consultancies heard by Valor believe that the process of reducing key interest rate Selic, after August, and the more controlled inflation environment after the second half, tends to increase this potential income to be converted into consumption, but there will still be inequalities in this distribution process.
“Economic growth does not guarantee income distribution and expands consumption, what it does guarantee is labor qualification,” said Fabio Bentes, economist with the National Confederation of Commerce of Goods, Services and Tourism (CNC).
A dataset of different surveys, conducted after the recent release of statistics agency IBGE demographic census, shows that more than half of the ten states with the least optimistic estimates for consumption potential this year are those already with the highest levels of income inequality, such as Amapá, Amazonas Rio Grande do Norte and Pará.
The conclusion is part of a survey made at Valor’s request by Geofusion, a data collection and analysis company, which serves retail and industry clients, with information on household income distribution, from IBGE, published in May.
“When we look at the data, the states with the best projections for 2023 are in the Central-West and South regions, which we say are places that ‘do not move the pointer’. As they are strong in agriculture, they still have low labor employment, and there is a circulation of resources for spending concentrated in the hands of a few,” said Isabela de Albuquerque, Geofusion’s data product manager. The explanation for this is that income spreads less and at a slower pace than in regions that have labor concentrated in activities that employ more people, such as trade, services, and industry.
Although there has been an increase in the pace of job creation in the central region of the country between 2019 and 2023, according to data from statistics agency IBGE’s Continuous National Household Sample Survey (Pnad Contínua), agriculture is not a major generator of direct jobs. Of the total employed in March in the region, 8% were in the agriculture, livestock, forestry, fishing and aquaculture sectors.
“It is the opposite of what happens in São Paulo and Rio de Janeiro, with strong services and trade, which even generate places and ‘spread’ more income, but which report much lower growth projections,” she said. For the two states, Geofusion’s estimate is a nominal rise of 2.57% and 0.25%, respectively. Mato Grosso, on the other hand, is projected to grow 11.94%; Paraná, 8.79%; and Goiás, 6.19%.
These are comparisons of performance in more mature consumer markets, such as the Southeast region, or with growth rates already high in recent years, such as the Central-West, so it is a rise over stronger bases of comparison.
By consumption potential, Geofusion measures how much of the available money is spent by the population in a given region, that is, the amount that circulate per year in the analyzed areas.
When cross-referencing the map of the estimated expansion of consumption potential by state with the 2022 Gini coefficient ranking, among the ten highest consumption growth rates, five are states with already low levels of socioeconomic inequality.
In this group with the highest growth estimates and the lowest inequalities are, in this order: Santa Catarina, Mato Grosso, Paraná, Mato Grosso do Sul and Goiás. The Gini index assesses the distribution of wealth in a given place on a scale between 0 and 1, with areas with lower levels of inequality reporting a coefficient closer to zero.
Among the ten states with the lowest estimates of increase in consumption potential, six reported the worst indices of inequality and income concentration: Amapá, Rondônia, Amazonas, Pará, Acre and Tocantins.
“If we look at nominal trade revenue from 2011 to 2021, states in the Northeast, North and Rio de Janeiro are below the average expansion, and the data are very adherent to the Rais [government social information report] material and consumer potential surveys,” said Mr. Bentes, with CNC.
For him there are some signs of greater economic decentralization, with the expansion of Santa Catarina, and he also mentions Espírito Santo. “These are regions, from a fiscal point of view, with better quality of public accounts, and with the development of new activities,” he said. According to Ms. Albuquerque, Santa Catarina had an advance mainly due to the greater consolidation of the service sector.
According to Mr. Bentes, the increased digitalization of retail, with chains spreading their delivery structures across the country, helps democratize consumption, and the tax overhaul, which shifts tax collection from origin to destination, is also expected to favor more states outside the Southeast region in mid-term. “But we still depend on an improvement in this scenario of investments in skilled labor, and general economic growth, which is what generates gain even in the long term.”
To collect the information, the data company relied on information from the Continuous National Household Sample Survey (Pnad Contínua), the Household Budget Survey (POF) and the Fundação Getulio Vargas’ survey of sectoral indicators. It also used Mastercard’s transaction base, which covers 60% of total card transactions in the country, and the data registry of the Secretariat of Federal Revenue and Big Data Corp, which captures information from 1.5 billion websites and public databases.
In addition to the inflationary factor, which affects the purchasing power of the population, and limits the real gain in the potential to be spent, there is the impact of the slowdown in the rate of population growth and the increase in the total number of vacant private households on the consumption potential of certain regions. Both indicators were presented by the IBGE census, says Marcos Pazzini, head of IPC Maps, another consumption potential indicator from IPC Marketing Editora.
This number of vacant private households rose by 87% between 2010 and 2022, according to the latest IBGE census, reaching 11.7 million. These factors cause a drop in the circulation of consumers in the affected areas.
The three municipalities with the highest percentage of vacant households, according to IBGE, are from the Northeast region: São João do Jaguaribe, in Ceará, Canavieira, in Piauí, and Bom Sucesso, in Paraíba.
“There has been a recent emptying of certain cities, and we are still studying this movement. It may have been a migration of people in the pandemic, after the crisis, who went to live in other municipalities, looking for better rental conditions or income. And this has an impact on consumption potential,” said Mr. Pazzini.
According to a research carried out by IPC Maps 2023, already published in June, the consumption potential in Brazil could reach R$6.7 trillion in 2023, a real increase of 1.5% over the previous year — in 2022, the increase was 4.3%.
According to the Geofusion survey, in 2022 the consumption potential reached R$4.77 trillion in the country, at current prices, practically stable over the previous year. When discounting inflation for the period, there is a contraction of 5.31% in the amount, calculated Valor Data.
For 2023, the company has started collecting initial estimates by state, but has not yet completed the national report.
There is also an impact of the financial cost of the interest rate on income. Despite the cuts in the key interest rate after August, the effects of this decline will only be seen further ahead, after 2024, say the consultants. The maintenance of high interest rates since the end of 2021 has compromised the current income of households, directly affecting the sum available for spending.
According to the Geofusion manager, the slowdown in the pace of population growth, which may be more intense in certain areas, impacts the volume of investments projected by companies by states – which, in the end, can generate new income and employment.
Industries and retail chains hire consultants and buy reports from data companies to define strategies for future investments and for generating jobs and income in the medium and long term by geographical region.
The current demand scenario, still in recovery, has forced companies to further segment launch and sales strategies, according to a set of criteria from several data sources at the same time. It is already possible to find out the level of economically active population by region by time of day or night.
Consultancies have been cross-referencing information from official agencies such as the number of inhabitants per city and state, education level, urbanization conditions and income classification (from classes A to E), with data from credit card companies, the population’s credit score, and even the movement of people by area (with Google Maps or Apple tools) to define projections and map trends.
For Ana Paula Tozzi, CEO of AGR Consultores, despite the strong expansion in the Center-South, companies have not been allocating resources mostly in these two regions, due to the volume and scale generated in sales in the Southeast and Northeast regions. “You can’t play all the chips there, by the strength of the middle classes in other markets, and even because these consumers, especially from the Central-West, migrate to São Paulo and Rio to consume strongly in these regions,” she said.
*Por Adriana Mattos — São Paulo
Source: Valor International