MercoPress. South Atlantic News Agency

Snail growth in Brazil's 2014 retail sales anticipate a very tough 2015

On news of retail sales the Real plunged to a ten-year low but on Thursday recovered some of the lost ground. However in six months the Real is down 19%

Retail sales in Brazil increased 2.2% in 2014 over the previous year, the smallest expansion in 11 years, the Brazilian Institute for Geography and Statistics, or IBGE, reported this week. The sector suffered its worst year since 2003 when sales tumbled 3.7%. In 2013, retail sales grew 4.3%.

 The announcement plunged the Brazilian currency to a ten year low, although at the end of trading in Sao Paulo on Thursday it had recovered slightly to 2.8238 Reais to the dollar, which is just a few cents short of the estimates for the whole of 2015. The Real has lost 19% of its value against the dollar in the last six months.

IBGE attributed most of the slowdown to the poor performance of food and beverage sales, the major segment, which had enjoyed strong growth in recent years as poverty and unemployment diminished.

Food sales increased 1.3% in 2014 compared with 1.9% the previous year, according to the IBGE.

The fall in food sales “may be explained by the deceleration in growth of workers' income, which rose 1.4% in 2014 as opposed to 2.4% in 2013,” the agency said.

“This sector's performance was also influenced by consumer prices for food, which, in the past 12 months, increased 7.1%, above the official inflation rate of 6.4%”, the statement said.

Five out of eight retail segments ended 2014 with increases over the previous year.

Sales of goods for personal and household use increased 7.9% last year; pharmaceutical and medical goods increased 9%, and fuels and lubricants increased 2.6%.

Furniture and appliance retailers saw their sales increase a mere 0.6% last year, down from 5% growth in 2013, a consequence of a rise in interest rates and the government's decision to withdraw tax incentives aimed at helping the sector weather the global economic crisis.

Sales of motor vehicles and parts fell 9.4% last year after a 1.4% increase in 2013, and IBGE blamed in part “the slowdown in lending, the end of tax incentives for this sector, the increase in interest rates and constrains in family budgets.”

Economists expect the slowing of retail sales will continue in 2015.