SAO PAULO: Retail sales in Brazil likely gained in April from the previous month as rising wages and lower borrowing costs supported demand for consumer goods, although some analysts say more retail growth this year may be limited.
Brazil's domestic market, fueled by a growing middle class and record-low interest rates, has kept the nation's economy from slipping into recession as industry struggles with high labor costs and weak global demand.
Retail sales are expected to rise 1.4 percent in April from March after seasonal adjustments, accelerating from a 0.2 percent rise in the previous reading, according to the median forecast of 17 analysts polled by Reuters.
"The increase in salaries that we have been seeing over the course of the year and the expansion in personal credit with lower interest rates should favor retail sales for the time being," said Rafael Leão, an analyst at Austin Ratings in Sao Paulo. He highlighted furniture, white goods, and clothing as segments with the greatest potential for gains in the month.
Brazil's jobless rate fell in April to a record low for the month as real wages gained 6.2 percent over the previous year, according to Brazil's national statistics agency IBGE.
That rise in income comes alongside a decline in borrowing costs as Brazil's central bank continued to slash interest rates in May to a record-low 8.5 percent.
"Consumption has supported the growth of Brazil's economy, and it should continue to do so for a while as long as policies that support credit expansion continue," Leão added.
Brazil's economy grew just 0.2 percent in the first quarter from the previous quarter as businesses cut back investments and the global economy sagged, frustrating policymakers who are struggling to meet annual growth targets of between 3 and 4 percent.
Brazil's government has responded by taking steps to boost consumption, including tax cuts and credit incentives, with Finance Minister Guido Mantega indicating earlier this month that more measures are around the corner.
Some analysts, however, are skeptical that government efforts to boost retail consumption are sustainable.
"For 2012, retail doesn't have a lot of room to grow much further," said Andre Perfeito, chief economist with Gradual Investimentos in Sao Paulo, who noted that retail sales grew 4.1 percent in the first quarter from the fourth, the biggest quarterly rise since 2000.
The IBGE will release retail sales data for April on Thursday at 9 a.m. (1200 GMT).
Sales volumes are expected to rise 7.5 percent from April 2011, the Reuters poll showed, less than the 12.5 percent gain in the prior month.
Forecasts for the monthly data ranged from a drop of 0.5 percent to a rise of 2.5 percent, while estimates for the annual rise varied from 6.1 to 9.4 percent.
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