5/15/2014 @ 12:41下午
Thursday’s weak performance in world equity markets was given an extra push downward in Brazil thanks to weaker than expected retail sales.
Shopaholic Brazilians have been playing it cool with the wallet in March, with sales falling 0.5% from February figures. Consensus estimates were for at least flat growth. February sales were revised to flat from 0.2% previously.
Most retail groups were down in March. Seven of the 10 main sectors of the retail index contracted during the month. The largest declines came from office staples, fuel and supermarket sales. In terms of broad retail sales, the highlight comes from a 3.1% drop in building material, while the auto sector was also down but by a more modest 0.2%.
Today’s report confirms the downward trend of retail activity in Brazil, says Marcelo Salomon, an economist for Barclay Capital in New York.
The core retail sales growth trend grew only 0.3% quarterly from a 1.1% quarterly growth rate in the fourth. April leading indicators point to slightly better numbers, as auto sales bounced back and food prices shocks are fading, although consumer confidence has been diminishing at the margin. Any rebound should not be sustained over time, and the outlook for retail activity remains subdued, Salomon says.
Bill Adams, a senior international economist for PNC Financial Services Group in Pittsburgh, says investors should view the numbers with caution.
“It would make sense for Brazilian retail sales to soften in early 2014 as higher interest rates and inflation eat into consumer spending power, but March’s release looks too noisy to judge how much sales are really slowing, if at all,” Adams notes.
March’s retail sales report, which was noisy but probably consistent with a softer trend, fits in with recent data suggesting that Brazil’s growth is modest but inflation is still too high. Another 25 basis point rate hike seems the most likely outcome of the May monetary policy decision, but this and other recent soft data on growth give the central bank room for discretion, Adams says.
Moreover, World Cup soccer matches begin in Brazil next month, which will more than likely lead to a increased spending on everything from beer to gasoline and ethanol.
Brazil’s stock market sold off today, tracking Wall Street’s decline.
The iShares MSCI Brazil (EWZ) exchange traded fund was down nearly 2% in early-afternoon trade. U.S. stocks also dropped more than 1% on Thursday, fueled by a sell-off in small-cap stocks and disappointing results from Wal-Mart.
“In reference to the equity market’s current position, I am concerned with a number of things that are now turning negative simultaneously in this economic cycle,” says Joseph E. Meyer, publisher of the Straight Money Analysis macro newsletter out of Florida. ”The primary concern is the fact that we are now witnessing a cresting of corporate profits, which is a very serious long-term indicator.”
Geoff Dennis, a strategist for UBS in Boston says Brazil remains an uncrowded trade, as investors are still largely underweight the world’s seventh largest economy.