Brazilian retail sales volumes surprise to the upside in June

The contraction in Brazilian retail sales slowed sharply in the second quarter of 2016, prompting at least one economist to say that the recession in the country´s domestic demand was over.

Retail sales volumes in Brazil edged higher by 0.1% month-on-month in June, led by a 0.8% gain in the 'other items for personal and domestic use category'.

Economists had anticipated a fall of 0.4% in sales volumes.

Large gains were also seen in sales of books and magazines and in fashion sales, Andres Abadia, senior international economist at Pantheon Macroeconomics pointed out.

Year-on-year the rate of decline in retail sales volumes slowed sharply, from -9.0% in May to -5.3% in June.

Broad retail sales, including autos and construction that is, registered a 0.2% dip month-on-month, as expected.

For the whole of the second quarter retail sales dropped 1.0% when compared to the previous three months, following a 3.0% drop in the first quarter.

"Consumers in Brazil overall ended the second quarter on a less terrible note, adding weight to our view that the domestic demand recession has finally bottomed, following a very grim first quarter.

"Looking ahead, though, consumer spending likely will remain sluggish as economic fundamentals are still poor. Increasing unemployment, tighter credit conditions and fiscal austerity will continue to squeeze consumers in the second half of the year. Next year, however, likely will be better for consumer spending, in line with the strong rebound in consumers’ confidence, and the end of the political chaos," Abadia said.

As of 14:27 BST the US dollar was 0.28% lower against Brazil´s real to 3.1639.