Retail grows in January, but does not recover losses from the pandemic

The volume of retail sales in Brazil increased by 0.8% in January, compared to December, reported this Thursday (10) the IBGE (Brazilian Institute of Geography and Statistics).

The advance, however, was concentrated in part of the sector, as only three of the eight commercial activities surveyed registered positive rates in the first month of 2022.

The 0.8% rise was above financial market expectations. Analysts consulted by the Bloomberg agency projected an increase of 0.3%.

Even with the advance, retail is still below the pre-pandemic level. It is at a level 1% lower than in February 2020, before the economic effects generated by Covid-19.

The sector is also 6.5% below the peak of the historical series, recorded in October 2020. This signals that, throughout the health crisis, the sector’s reaction lost steam, amid a context of stronger inflation, higher interest rates and difficulties in the labor market.

“The retail trajectory continued quite shaky in recent months”, defined Cristiano Santos, manager of the IBGE survey.

The institute reported that, in January, the 0.8% increase was driven by the sale of pharmaceutical, medical, orthopedic and perfumery items (3.8%) and other articles for personal and domestic use (9.4%). .

Santos highlighted that the pharmaceutical trade has been collecting positive signs in the latest disclosures. Other articles activity rose after a sharp drop in December 2021, revised to -9.9%.

According to the researcher, promotions may have benefited this segment in January. The branch of other articles brings together different stores, such as department stores.

In the first month of the year, the segment of equipment and supplies for office, IT and communication (0.3%) also registered a positive change in the volume of sales.

On the other hand, there were decreases in five of the eight activities surveyed: fabrics, apparel and footwear (-3.9%), books, newspapers, magazines and stationery (-2%), furniture and household appliances (-0.6%). fuels and lubricants (-0.4%) and hypermarkets, supermarkets, food products, beverages and tobacco (-0.1%).​

In Santos’ view, the recovery of trade is slowed down by inflation, which hits sectors such as fuel and supermarkets hard. “It’s a factor of relevance.”

High after strong review

The retail data series has been marked by strong revisions. It was no different this time. In addition to publishing the January result, the IBGE updated previous figures.

The drop in retail sales in December 2021, for example, became much more intense with the revision, from -0.1% to -1.9%.

Throughout the pandemic, the institute indicated that the health crisis brought a lot of volatility to the statistics and, therefore, caused constant and wide-ranging updates.

The segment of other articles of personal and domestic use pulled the December revision, leaving a fall of 5.7% for a retraction of 9.9%.

In the series without seasonal adjustment, retail trade fell by 1.9% in January, compared to the same period in 2021. It was the sixth consecutive negative rate. In this cut, the median projection of the market was a 2.8% indentation.

In the 12-month period up to January, the sector registered an increase of 1.3%, according to the IBGE. The data is similar to that verified up to December (1.4%).

After the initial phase of the pandemic, retail began to bet on lifting restrictions on activities and reopening stores to recover.

The recovery, however, has been threatened by the scenario of escalating inflation, higher interest rates and income weakened by the crisis. The factors, taken together, reduce the purchasing power of the population.

War raises risks

According to analysts, the fight against rising prices tends to get more complicated due to the effects of the war between Russia and Ukraine. With the tension of the conflict, agricultural commodities and oil had strong increases in the international market.

The fear is that these advances will spread along the production chains, even reaching commerce.

Pressured by the rise in oil, Petrobras announced on Thursday readjustments in the prices of gasoline and diesel. In gasoline, the increase for distributors is 18.8%. In relation to diesel, the advance is even greater, 24.9%.

In the view of CNC (National Confederation of Trade in Goods, Services and Tourism), the war “should increase pressure on retail prices”.

“Initial concerns are about the impacts on fuels in the face of rising oil prices,” the organization said in a report.

“Additionally, the supermarket sector – the largest in retail – will be potentially impacted by medium-term pressures arising from readjustments in agricultural commodities and the eventual shortage of fertilizers”, he added.

CNC also revised from 0.9% to 0.5% the expectation for retail sales in 2022. According to the entity, the supermarket and fuel sectors account for almost half of the annual retail business. Faced with the threats of war, the forecast for 2022 was revised downwards.

higher interest

In an attempt to curb inflation, the BC (Central Bank) has been raising the basic interest rate. In February, the Selic rate reached 10.75% per year.

The financial market expects a higher rate by the end of 2022. The median of the most recent edition of the Focus bulletin, released on Monday (7) by the BC, indicates a Selic rate of 12.25%. There are already institutions projecting interest rates above 13% until December.

The side effect of the higher Selic is the increase in the so-called cost of credit in the country. More expensive loans play against consumption, especially of higher-value goods.

“With food and fuel rising and interest rates higher, the year will be difficult for the retail trade”, predicts Alex Agostini, chief economist at the Austin Rating agency.

“We are in an election year. Naturally, people are more cautious and tend to seek less funding”, he adds.

In extended retail, which includes vehicles, motorcycles, parts and construction material, the volume of sales fell by 0.3% in January, compared to December, informed the IBGE this Thursday.

Compared to January 2021, extended retail fell 1.5%. The accumulated in 12 months registered growth of 4.6%.