Brazil's retail sales were down -0.8% yoy and -6.6% qoq (annualised rate) in Q1, leading to an overall contraction of -5.9% qoq (annualised rate) in private consumption. According to Societe Generale, retail sales are expected to show modest growth in April on seasonally-adjusted and sequential basis (0.3% mom), although they are likely to remain on a trend downward (-1.6% yoy) in line with the nearly flat consumption growth of 0.6% qoq (annualised rate) in Q2.



In recent quarters, growth in retail sales and private consumption has been flat at best compared even with the normal growth of 6.3% and 3.9% seen during 2012-13 (and compared with cyclical peaks of 8.8% and 5.6% observed in 2010-11). The shape and outlook of the labour market in particular and the overall economy in general offer little hope of a near- to medium-term revival in consumption.



In fact, the labour market is expected to deteriorate substantially over the next few quarters and this is bound to hit wage growth, income and private consumption. Further to this, the government's proposal to keep social security spending in check - in a bid to improve fiscal balances - will also hurt consumption growth over the next several quarters. Societe Generale suggests, substantial investment and growth momentum will be needed to reverse the current downward trajectory in private consumption.