The result exceeded estimates and could be related to the changing consumer profile; According to experts, Brazilians look forward to Christmas shopping on Black Friday in November and promotions in January
RIO AND SAO PAULO – IL Retail The year started off great. Commercial sales increased 2.5% in January 2024 compared to December 2023, according to Monthly Commerce Survey data released this Thursday 14th by Brazilian Institute of Geography and Statistics (IBGE).
The result exceeded the most optimistic estimates of financial market analysts interviewed by Station/Broadcast, which forecast a decline of 0.5% versus an increase of 1.7%, with a positive median of 0.2%. The higher-than-expected growth reflects the dynamics of an overheated labor market and rising wages in real terms, said economist Felipe Rodrigo de Oliveira, of resources chief MAG Investimentos.
“We see a dynamic improvement compared to last year for families, who have started consuming goods again,” Oliveira highlighted.
The bullish surprise spread across retail segments should ease fears of a slowdown in consumption at the start of the first quarter, according to Bradesco bank, which however expects some accommodation in sales starting in February. Itaú Unibanco highlighted the good performance of supermarkets and other income-sensitive items, in line with stronger labor market data for the month, generating a positive bias for the projection of the Gross Domestic Product (GDP) of the first quarter of 2024.
“Instead of seeing a job market and a cooling of economic activity, we are seeing exactly the opposite,” said economist Homero Guizzo, of stockbroker Terra Investimentos, for whom the result could pose a further challenge to the Central Bank, signaling a point of attention for the monetary authority, which has not yet completed the disinflation process.
Retail performance in January could be related to a change in the profile of the Brazilian consumer, said Cristiano Santos, head of monthly trade survey at IBGE. Remember that retail has shown a change in sales pattern, with Christmas shopping being brought forward to November, during Black Friday promotions, weakening December’s performance, which was followed by a better January, perhaps due of sales at the beginning of the year.
Retail expansion in January 2024 was the best sales performance since January 2023, when growth of 2.5% was recorded.
“A high January reflects a low December,” said Cristiano Santos, of IBGE. “It’s a pattern we’ve seen over the last couple of years,” he added.
This pattern of less intense Christmas and stronger January in sales occurred in both 2023 and 2024, but had not been observed in the previous three years.
“Black Friday ends up concentrating more and more sales in the month of November, in a certain sense, it ends up stealing the spotlight from Christmas,” explained Santos. “People have already done their Christmas shopping in November and are waiting for the promotions in January.”
According to the IBGE researcher, “it is not guaranteed that there is a latent seasonal factor”, however, this is what has happened in the last two years, so “it is possible that this behavior is conscious on the part of the consumer”.
Expansion in most businesses
From December 2023 to January 2024, there was growth in five of the eight retail businesses surveyed: apparel and footwear (8.5%), computer and communications equipment (6.1%), other personal use items and domestic, including department stores (5.2%), furniture and household appliances (3.6%) and supermarkets (0.9%). The declines occurred in the books and stationery sectors (-3.6%), pharmaceutical and perfumery items (-1.1%) and fuels (-0.2%).
According to Santos, January’s positive result was largely driven by segments that performed worse in December. At the same time, supermarkets, the most important activity in retail trade, also grew, contributing to an improvement in the global average.
Supermarket sales have grown for three consecutive months, with the most significant increase in December and January. Santos recalls that the performance of retail businesses offering basic products depends on the purchasing power of consumers. The current scenario envisages a reduction in interest rates, which contributes to the expansion of credit concessions, and an improvement in the labor market, with more employees and a growing mass of income. In this context, the latest progress in volumes sold by supermarkets “also has to do with the general improvement of these (purchasing) conditions”, confirmed Santos.
In expanded retail – which includes wholesale business of vehicles, building materials and food products – sales grew 2.4% in January compared to December. The automotive sector grew 2.8%, while construction materials fell 0.2%.
With the periodic reformulation of the monthly trade survey, the expanded retail performance now includes data on food wholesale, but there is still no individual information for this activity in the series that discounts seasonal influences. The IBGE explains that it is necessary to have longer time series to build a coherent database that allows for seasonally adjusted information.
Compared to the same month last year, captive retail sales in January 2024 increased 4.1%, the eighth consecutive increase. The increase was the strongest in January since 2014, when growth of 6.4% was recorded.
In expanded retail, sales grew 6.8% in January 2024 compared to January 2023, the best performance for this time of year since 2013, when there was a 7.0% increase.
Retail sales higher than pre-pandemic
Retail sales volume reached January at a level 5.7% higher than the level of February 2020, before the covid-19 pandemic. In expanded retail, which includes vehicle and building materials businesses, sales are 3.6% above pre-pandemic levels.
The pharmaceutical items segment operates at a level 27.2% higher than the pre-health crisis level; fuels and lubricants, up 10.7%; supermarkets, up 9.9%; vehicles, up 3.8%; and building materials, up 3.0%. Other personal and household items are 11.0% below the February 2020 level; furniture and appliances, down 12.4%; information and communications equipment, down 8.8%; fabrics, clothing and footwear, down 19.3%; and books and stationery, down 46.7%.
“Some activities remain well below pre-pandemic levels,” underlined Cristiano Santos, of IBGE.
According to him, in addition to individual influences on the worst-performing businesses, the negative result also reflects the accounting problems of large retail chains, which have suffered throughout 2023 with store closures and declining revenues, he concluded.
Source: Terra
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