Itaú BBA - Core retail sales in January point to another gain in consumer spending in 1Q18

Macro Brazil

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Core retail sales in January point to another gain in consumer spending in 1Q18

March 13, 2018

Broad and core retail sales accelerated on a quarterly basis

Core retail sales climbed 0.9% mom/sa in January, beating the median of market expectations (0.5%) and our estimate (0.4%).

Broad retail sales (including vehicles and construction material) declined 0.1% during the month, slightly below the median of market expectations (0.2%), but matching our call.

Broad and core retail sales accelerated on a quarterly basis, suggesting that household spending continues to expand in 1Q18.

For the time being, we forecast a gain of 0.5% mom/sa in broad retail sales in February.

Quarterly change accelerates again

Core retail sales climbed 0.9% mom/sa in January, beating the median of market expectations (0.5%) and our estimate (0.4%). Compared to January 2017, core sales expanded 3.2%. The December reading was revised upward by 0.7pp.

Broad retail sales declined 0.1% mom/sa, slightly below the median of market expectations (0.2%), but matching our call. Compared to January 2017, broad retail sales grew 6.5%. The December result was revised upward by 0.5pp.

In our view, the Black Friday event was not yet fully incorporated into the seasonal adjustment and may distort monthly readings in November and December. Hence, quarterly changes provide a good indicator of the recent dynamics in retail sales. Using this metric, core sales picked up to 0.4% from 0.0%, and broad retail sales also accelerated, to 1.2% from 0.5%.

Breakdown of broad retail shows a better picture than the monthly reading

Six out of ten broad retail components posted seasonally-adjusted increases in January, outlining a better picture than the 0.1% slide in the headline result.

Coincident indicators point to modest increase in broad retail sales in February

Coincident indicators out so far (vehicle sales, surveys with consumers and retail entrepreneurs, Serasa retail index) suggest that broad retail sales advanced 0.5% mom/sa in February.
 

Artur Manoel Passos

Alexandre Gomes da Cunha



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