Warm Black Friday and new variant turn the economy on yellow

Black Friday warmer than anticipated and the market scare last week, with the insecurity caused by omicron, a new variant of the coronavirus, point to a worse-than-expected end of the year.

With high inflation and low income, the trend is for consumers to repeat at Christmas the behavior they had last Friday, prioritizing purchases of basic necessities and lower value, leaving aside durable goods.

Economists heard by sheet they also do not rule out further downward revisions to GDP (Gross Domestic Product) for the last quarter and 2021.

“It was a weaker Black Friday, in terms of sales volume”. We expected a 10% increase in circulation and an increase of 5% was observed. devaluation of the real”, says Fabio Bentes, senior economist at CNC (National Confederation of Commerce of Goods, Services and Tourism).

According to Bentes, this year’s inflation made it more difficult for commerce to sign stronger discounts for consumers. CNC points out that, last year, 46% of the most sought after products on Black Friday had high discount potential. This year, only 26%.

“As Black Friday is a thermometer for Christmas, the trend is for the end of the year to be record sales, but with sales volume less than or at most equal to last year. A few months ago, the projection was for growth. “

The end of 2021 had already been worse even before Black Friday, summarizes economist João Leal, from Rio Bravo. With the performance of commerce, industry and services still weak since the third quarter, recent sales results only show a reduction in consumption potential.

“What we see is a worsening coming from abroad, a difficult situation in the supply chain, a 12-month high in foodstuffs is also relevant and a depletion of demand for services after the reopening,” says Leal.

He considers that, although the effects on the economy of the new variant of the coronavirus are still difficult to measure, the baseline scenario today is not one of measurements as rigorous as those of last year. Even though the news has an impact on the market, it still seems temporary.

“For 2022, we are forecasting a 0.2% GDP retraction. But if Black Friday confirms weaker sales also at Christmas, it could be that the fourth quarter of 2021 will be worse than expected and this year too. The bias it’s down in 2021 and 2022.”

“The economic loss of breath has been happening, both demand and production of goods are retreating in recent months. Looking abroad, the slowdown should impact the prices of commodities, such as iron ore; in Brazil, high interest rates will impact trade in the coming quarters,” says Luka Barbosa, economist at Itaú Unibanco.

Some of that effect on interest rates will come later this year, but most of it will come next year. The bank’s scenario for this year and the fourth quarter already considers these difficulties: they forecast 4.7% growth for 2021, with 0% in the third quarter and 0% in the fourth quarter.

Regarding the new variant, Barbosa assesses that, despite being worrying, there is a certain amount of learning in the world about how to deal with the existence of the virus. In the first wave, everything closed; in the second and third, the measures were already milder.

Confidence indicators for November are also negative and consumers are worried about higher inflation and higher interest rates, says Sergio Vale, chief economist at MB Associados.

more party favors

“There is a perception that Christmas and Black Friday should be reduced to cheaper products, which fit the population’s budget. They will be items with lower added value, without so many electronics or sophisticated products.”

It is worth noting that the economy continues to be heavily affected by inflation and it is starting to become clear for the toughest scenario expected for 2022. “Consumers are afraid of getting into heavy debt for next year.”

He ponders that, although news about the increase in Covid-19 cases abroad are worrying, in Brazil, adherence to the vaccine and the drop in deaths provide some relief.

Last Friday (26), the market reacted with pessimism to news of the new omicron variant. The shares of companies most affected by possible measures to restrict movement, such as airlines and tourism, ended the trading session on a low.

Services and tourism

For CNC’s Bentes, the new variant hampers the service sector, which counted on the reopening to recoup last year’s losses. “Consumers can rethink tourist activities, which have a high season now. Even for domestic tourism, people can be safer.”

According to Abav (Brazilian Association of Travel Agents), it is not yet possible to measure the extent of the impact on Brazilian tourists. “What we can say is that we are attentive to the scenario, and our travel agencies, able to guide consumers.”

According to CVC, the December period marks the beginning of the opening of the summer season in Brazil and, with the advance of vaccination, currently 90% of the group’s customer shipments are domestic travel, in line with the historical preference of consumers in this time of the year.

Abear (Brazilian Airlines Association) is closely monitoring the possible developments of the new variant of the coronavirus and informs that it is waiting for more information to be able to assess the impacts on the sector.