World Economy

Brazil Retail Sales Decline

Brazil Retail Sales DeclineBrazil Retail Sales Decline

Brazil's retail sales declined in August after flat-lining the previous month, suggesting domestic demand may be losing steam after a rebound in the second quarter.

Retail sales fell 0.5% by volume in August from July in seasonally adjusted terms, the Brazilian Institute of Geography and Statistics, or IBGE, said Wednesday. Compared with August 2016, sales were up 3.6%, Dow Jones reported.

The month-on-month decline was broad-based, with lower sales of everything from foods and beverages to fuels and pharmaceuticals, the IBGE said.

The slowdown bodes poorly for Brazil's recovery from the deepest recession in more than a century. After two straight years of economic contraction, growth resumed in the first half of this year, driven in large part by consumer spending.

But economists warned that domestic demand was artificially aided by a one-off decision by the government to let workers draw money from the unemployment-insurance fund.

Brazilian farmers will likely produce a smaller amount of corn and soy in the 2017/18 season due to less favorable weather than the prior crop year, food supply and statistics agency Conab said on Tuesday.

In its first forecast for the 2017/18 crop, Conab estimated Brazilian grain production at between 224.1 million tons and 228.2 million tons, compared with 238.5 million tons in the prior cycle. The lower end of the range would represent a 6% drop in output.

Meanwhile, the Brazilian economy is expected to grow 0.7% in 2017 and 1.5% in 2018, said the International Monetary Fund, raising its estimates for the South American country. In the previous report, IMF projected a 0.3% growth in 2017 and a 1.3% rise in 2018.

According to the IMF, its upwards revision for the Brazilian economic growth is due to the performance of the agribusiness and higher consumption, RTTNews reported.

"In Brazil, strong export performance and a slowing down in domestic demand have allowed the economy to resume growth in the first quarter of 2017 after eight quarters of decline," the IMF noted in the report.

The fund mentions the release of mandatory workers savings as one of the factors that helped boost the Brazilian economy but points out that the increasing political uncertainty and the weakening of investments still weigh on the country's economy.

"The gradual restoration of confidence—with the implementation of key reforms to ensure fiscal sustainability over time—should push growth to 2% over the medium term," the IMF said.


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