Brazil Retail Sales Rise at Fastest Pace in Two Years
Bloomberg, April 14, 2010
Brazil’s retail sales rose the most in two years in February, leading traders to step up bets that the central bank will raise interest rates by 75 basis points this month to cool inflation at a 10-month high.
Sales jumped 12.3 percent in February from a year ago, surprising all 31 analysts in a Bloomberg survey whose median estimate was for a 10.5 percent increase. Sales rose 1.6 percent from January, the national statistics agency IBGE said in a report distributed today in Rio de Janeiro.
“The data increase the probability of a 75 basis-point hike,” Flavio Serrano, senior economist at Banco Espirito Santo de Investimento, said in a phone interview from Sao Paulo. “The inflation scenario is already very polluted by negative pressures, so we think a bigger increase in April would be an efficient way to start improving the outlook.”
Yields on interest rate futures for all maturities rose, with the contract due January 2011, the most traded on Sao Paulo’s BM&F futures exchange, surging six basis points to an 11-month high of 10.63 percent at 9:50 a.m. New York time. The real rose 0.3 percent to 1.7444 per dollar.
Central bank President Henrique Meirelles said in an April 12 interview that as growth accelerates the “challenge now is not to allow this economy to overheat.” Traders are pricing in a 71 basis-point increase in the Selic target rate when policy makers meet April 28-29, according to Bloomberg estimates. The Selic is at a record low 8.75 percent.
Inflation in March accelerated to 5.17 percent, above the midpoint of the government’s 4.5 percent target range. Three central bank board members voted for a 50 basis-point increase at last month’s meeting, when the Selic was left unchanged for a fifth straight time.
Brazilians are buying more cars and groceries, boosting domestic consumption that has economists surveyed by the central bank forecasting 5.6 percent growth in 2010.
Supermarket, and food and beverages sales jumped 11.5 percent in February from a year earlier, reflecting a 6.3 percent rise in real wages in February from the same month last year, according to IBGE.
Stable food prices also contributed to the rise in supermarket sales, the agency said in a statement today.
“Segments that depend on salaries benefited the most because of better employment and wage indicators,” Serrano said.
Year-on-year supermarket sales jumped 6.7 percent in February, Brazil’s Association of Supermarkets said March 31.
February’s jump in retail sales was the biggest since a 12.8 percent annual rise in February 2008 and exceeds a 10.4 percent surge in January.
Economists had expected a 0.6 percent monthly rise, according to the median estimate of 26 forecasts in a Bloomberg survey.