Retail sales in Brazil unexpectedly fell in March at the steepest monthly rate in 14 years, strengthening bets on a bolder interest rate cut at the end of this month. Sales volumes excluding cars and building materials fell 1.9% in March from February, government statistics agency IBGE said. Sales fell 4.0% from the year-earlier period.
Consumption has slumped as a record 14 million Brazilians were unemployed after the country’s worst recession ever. The surprisingly weak performance of Brazilian commerce in March frustrated hopes of an imminent recovery after an extraordinary upward revision for the January results.
Weak economic activity and below-target inflation is expected to prompt the central bank to cut its benchmark lending rate by 125 basis points on May 31, after a 100-basis-point cut last month.
IBGE revised previous data again this month due to a recent change in the base year for the series. Sales fell 1.6% in February, down from a previously reported decrease of 0.2%, and rose 6.0% in January, up from a rise of 5.5% previously. Economists said the frequent revisions complicate forecasts just as Brazil’s economy seems to be nearing a turning point.
“The new retail sales survey has been exceedingly noisy and volatile in recent months, making it difficult to extract the proper signal in terms of the underlying strength of private consumption and overall activity,” Goldman Sachs economist Alberto Ramos wrote in a note.
The government continued to see the economy resuming growth in the first quarter despite the weak retail performance in March, but job creation should only recover after mid-year, Finance Minister Henrique Meirelles said.
A broader retail sales measure that includes cars and building materials fell 2.0% in March from February after a 0.6% increase in the previous month.