What’s Happening With Real Retail Sales?

BRAZIL ECONOMICS - Report 17 Apr 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

In February, the IBGE (national statistics office) estimates that real retail sales took a large step upward, but clarifies that this is due to a methodological revision, which is done periodically. Apparently, the increase cannot be interpreted as a trend change, but rather only a once and for all change in the series’ level. Therefore, despite having the effect of raising the GDP variation in the first quarter, this is not an indication that such growth rates will be repeated in the next few quarters. To provide a bit more insight, we applied our explanatory model of real retail sales, finding evidence that given the fragility of the labor market; and due to the low dynamism of credit, the most likely interpretation is that retail sales (and household consumption) are only recovering gradually, not accelerating meaningfully.

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