(Bloomberg) — Brazil’s retail sales in January unexpectedly rose, as the central bank continues to raise rates in the world’s second-biggest emerging market. Swap rates jumped.
Sales rose 0.8 percent after a 2.6 percent decrease in December, the national statistics agency said in Rio de Janeiro. That was above all but two estimates from 33 economists surveyed by Bloomberg, whose median forecast was for a 0.5 percent drop.
President Dilma Rousseff’s new economic team is tightening both fiscal and monetary policies. Whereas higher taxes and regulated prices aim to fortify fiscal accounts, the highest borrowing costs in six years are designed to rein in inflation. Rousseff has said that the adjustment is laying the foundation for the next phase of sustainable growth.
Swap rates on the contract due January 2017 rose 20 basis points, or 0.20 percentage point, to 13.98 percent at 9:18 a.m. local time. The real weakened 1.2 percent to 3.2041 per U.S. dollar.
Sales of food, beverages and tobacco at hypermarkets and supermarkets rose 0.3 percent after a revised 0.2 percent decline in December. Sales of office equipment and materials rose 12.3 percent after a revised 7.6 percent decline the previous month. Sales of furniture and appliances increased 2.4 percent after a revised 9.2 percent decline.
Construction Materials
Retail sales in January rose 0.6 percent from the previous year, versus a median forecast for 1.3 percent decline. The broader retail index, which includes cars and construction materials, fell 4.9 percent from a year ago, versus a median estimate for a 7.8 percent tumble.
Policy makers have raised the key interest rate four consecutive times since Rousseff won re-election in October, to 12.75 percent. Central bank director Luiz Awazu Pereira told reporters last month that monetary policy has to work to slow inflation to the 4.5 percent midpoint of the target range by the end of 2016.
Complicating the central bank’s task is a weakening currency that’s boosting the cost of imports. The real has plummeted 17 percent this year, more than all other major currencies tracked by Bloomberg. Yesterday it closed at its weakest level in more than a decade, and former central bank directors including Affonso Celso Pastore expect further deterioration, they said at a conference yesterday.
Tighter monetary policy has yet to slow annual inflation, which has accelerated since December to its fastest in nearly a decade. Economists surveyed by the central bank expect it to close the year at 7.77 percent, faster than the 7.70 percent rate in the year through February. It’s being fueled in part by an increase to regulated prices to shore up government accounts, the prices of which rose 2.37 percent in February alone.
Brazil’s unemployment rate is starting to rise, hitting 5.3 percent in January and heading for a peak of around 6.5 percent this year, according to Jankiel Santos, chief economist at Sao Paulo-based investment bank BESI Brasil.
Consumer confidence as measured by the Getulio Vargas Foundation fell in February to its lowest since the survey began nearly a decade ago.
That nosedive in sentiment is reflected in the MSCI index of Brazilian consumer-discretionary stocks, which include Lojas Americanas SA and Lojas Renner SA. At Thursday’s close it had lost 30 percent this year after rising 3.1 percent in 2014, more than 13 times the drop in the Brazil’s Ibovespa equity index.