The reopening of the economy, a low base of comparison and a stable unemployment rate combined with the use of savings and a rising average income helped retailers to achieve better-than-expected results in the first quarter. Although measures such as the authorization to withdraw money from Workers’ Severance Fund (FGTS) accounts can help in the short term, economists say that during the year factors such as inflation, high interest rates and household indebtedness are expected to hinder recovery.
According to the Monthly Survey of Trade (PMC) released Tuesday by the Brazilian Institute of Geography and Statistics (IBGE), the volume of restricted retail sales in the country rose 1% in March, compared to February, the third consecutive positive rate in the seasonally adjusted series, after 2.3% in January and 1.3% in February. In the expanded retail sector, which includes sales of vehicles and motorcycles, their parts and construction materials, the sales volume rose 0.7% in March compared with February. In the first quarter, the restricted retail sales volume advanced 1.9% against the fourth quarter, the first quarterly rise since the second quarter of 2021 (2.2%).
The March results, as well as that of the two previous months, surprised positively. For March, the median of the estimates collected by Valor Data from 30 consultancies and financial firms indicated an increase of 0.4% in the restricted retail sales volume, seasonally adjusted, against February. The range of projections was from -0.2% to +1.3%.
Cristiano Santos, manager of the survey, observes that, despite the positive trajectory of the retail market in the beginning of 2022, the performance is heterogeneous and only four out of 10 activities have recovered the sales volume observed before the pandemic.
“You have a number of factors influencing the first quarter. The main one is a very low base of comparison [December 2021], which ends up boosting some sectors. The unemployment rate was stable compared to the fourth quarter of last year,” Mr. Santos said. “The other point is that the average income grew 1.5% from one quarter to the next. So this increase of 1.9% in retail has to do with the real average growth of income,” he added.
Inflation held back the industry, he said. Mr. Santos points out the difference between the performance of retail revenue compared to volume. The nominal revenue of the restricted retail market rose 2.9% in March against February, but the increase in volume was lower, of 1%. In three activities, he points out, the inflation effect is higher: fuels and lubricants, hypermarkets and supermarkets, and fabrics, clothing and footwear.
For Lucas Rocca, economist at LCA, the higher-than-expected trajectory of retail in the first quarter is due to the use of savings accumulated mainly since the second half of 2020. In the first three months, he points out, expanded retail was up 1.1% from the previous quarter, seasonally adjusted. This leads to a statistical carryover for the next three months of 1.2% for the expanded retail, also on the margin, seasonally adjusted.
This, plus the effects of programs such as the authorization to withdraw funds from FGTS accounts and bringing forward the payment of 13th salary (a year-end bonus) for retired people, he says, is likely to still drive retail in the second quarter. In the second half of the year, however, he evaluates, the level of savings is expected to fall and there will also be a greater effect of the broader scenario. He expects a slowdown in the volume of retail sales due to real income pressured by factors such as inflation, high interest rates and household indebtedness.
Claudio Considera, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre/FGV), has a similar view. For him, the March performance was influenced by the easing of social-distancing measures, with masks no longer required and a “feeling of the end of the pandemic,” with shopping, along with face-to-face leisure activities. The figures for March, however, is unlikely to continue as inflation, the high unemployment rates and rising interest rates are expected to impact items whose sales require credit, such as furniture and appliances.
Source: Valor International