Retail sales retreat 0.1% in October and worsen economic scenario

In a scenario of inflationary pressure, higher interest and fragile income, the sales volume of the country’s retail trade dropped 0.1% in October, compared to September. The IBGE (Brazilian Institute of Geography and Statistics) released the data this Wednesday (8).

The performance was below market expectations. Analysts consulted by Bloomberg agency expected a 0.7% increase in sales.

October was the third month in a row with negative variation in retail, although the IBGE considers the most recent rate as relative stability, as it was close to zero.

According to André Perfeito, chief economist at Necton Investimentos, the result reinforces signs of loss of breath in economic activity.

“The data for October came much worse than expected. There is clearly a scenario of weakness in retail trade,” he says.

“This is the result of a perverse scenario for the income of Brazilians. We have high inflation and rising interest rates”, he completes.

Compared to October 2020, when commerce was trying to react after the onset of the pandemic, sales dropped 7.1%, indicated the IBGE. In this comparison, analysts estimated a smaller retraction of 6.1%.

With the performance of October, trade was 0.1% below the pre-pandemic level. IBGE considers February 2020 as a pre-crisis level.

In the accumulated result of this year, until October, the retail still registered advance, estimated in 2.6%. In a longer period of 12 months, there was also growth of 2.6%. The two rates, however, were already higher throughout 2021.

Cristiano Santos, manager of the IBGE survey, linked the loss of breath to the effects of rising inflation, credit restrictions and declining income from work.

“These are the main factors,” he said.

Inflation gained strength in the country with pressure from items such as fuel and electricity. In the 12-month period up to October, the IPCA (Broad National Consumer Price Index) rose by 10.67%. The double-digit mark is the highest since January 2016 (10.71%).

To try to contain inflation, the Copom (Committee of Monetary Policy of the Central Bank) should increase again the basic interest rate, the Selic, this Wednesday.

Meanwhile, the average income from work has been falling in Brazil. The indicator reached the lowest level for the third quarter of the IBGE’s historical series, started in 2012, according to data released on the 30th.

The lower income reflects the return of informal workers to the labor market, with lower wages, and stronger inflation, according to analysts.

In Perfect’s view, the performance of trade in October signals that the fourth quarter started “badly”, and the outlook until the end of 2021 is not very encouraging.

The last three months of the year bring together important dates for trade. After starting the quarter in the red, with the retreat in October, retail had a tepid Black Friday in November, with no record of crowds in stores, scenes that used to occur in previous years.

In December, the sector lives the expectation with Christmas, but the context of difficulties threatens the business of the date, ponders Perfeito.

“Perhaps Christmas is weak. Black Friday has not had such good data,” he says.

According to the IBGE, five of the eight activities surveyed in commerce had negative rates in October, compared to September.

There were declines in books, newspapers, magazines and stationery (-1.1%), furniture and appliances (-0.5%), fuels and lubricants (-0.3%), hypermarkets, supermarkets, food products, beverages and tobacco (-0.3%) and pharmaceutical, medical, orthopedic, perfumery and cosmetic articles (-0.1%).

Three activities showed growth. These were: fabrics, apparel and footwear (0.6%), other articles for personal and domestic use (1.4%) and office, computer and communication equipment and material (5.6%).

In a report, the CNC (National Confederation of Commerce of Goods, Services and Tourism) attributed the retraction of retail in October to the effects of inflation.

“The bonus represented by the increase in the circulation of consumers that allowed the sector to react after the two waves of the pandemic is close to exhaustion,” stated the entity.

Given this situation, CNC reduced from 3.6% to 3.1% the expectation of high sales volume in the trade this year. For 2022, the projection is for an advance of 1.2%.

Before disclosing the trade result, the IBGE released, last week, industrial production data, which fell 0.6% in October. It was the fifth consecutive contraction in the factories.

​The volume of the services sector, in turn, will be known next week.