Brazil's Retail Sales Fall 0.8% in July Amid Economic Slowdown

Retail sales in Brazil declined by 0.8% in July compared to June, according to the Brazilian Institute of Geography and Statistics (IBGE). This monthly drop was more than the 0.2% growth predicted by analysts and marked the second monthly decline in sales this year, after April's 1.1% fall. On an annual basis, retail sales increased by 1.2%, but still fell short of the expected 2.15% growth.

The contraction in sales occurred despite some positive macroeconomic factors such as a 0.67% deflation in food prices and lower fuel costs. However, five out of eight retail sectors saw reduced sales, with furniture and appliances dropping 4.9% and books and stationery down 4.2%. Categories like pharmaceuticals and fuels experienced growth during the period.

Family consumption also decreased by 0.4% in the second quarter, the first decline in three quarters. Economists attribute the weak retail performance to ongoing economic challenges including a restrictive monetary policy. The central Selic interest rate remains high at 14.0%, limiting credit accessibility for consumers. The Central Bank is expected to decide soon on a 0.25 percentage point rate cut.

Economist Matheus Pizzani of PicPay pointed out that the sales decline happened despite favorable macroeconomic conditions. Leonardo Costa, an economist with ASA, noted that discretionary spending categories are particularly struggling, while more essential goods segments remain stable. Overall, these indicators suggest a continuing economic slowdown in Brazil for the second half of 2026 despite a relatively strong labor market and government consumption stimuli.