Retail sales in Brazil exceeded forecasts in January(69969)

Brazil retail sales accelerate in January, topping forecasts

Brazilian retail sales rose by more than expected in January as domestic demand continued to drive Latin America's largest economy forward in 2010.

January retail sales went up a seasonally adjusted 2.7% compared with December and 10.4% compared with January 2009, the Brazilian Census Bureau, or IBGE, said Thursday.

The result was higher than analyst forecasts, which ranged from increases of 0.8% to 2.0% for the monthly comparison.

"The figures confirm the outlook for robust demand this year....The data also justified the central bank's decision to raise bank reserve requirements," said Luciano Rostagno, chief strategist at CM Capital Markets in Sao Paulo.

In February, the central bank opted to roll back measures taken to stimulate the economy last year, including an increase in reserve requirements on time deposits.

The strong January retail data reinforced the message from fourth quarter growth data, also released Thursday, that the economy is gaining pace after hard times and domestic demand is the driver.

As such, the central bank may lean towards an early start to an expected monetary tightening cycle, economists said.

"It is these details that will determine whether the central bank starts raising rates in March or April. However, the retail numbers are not a determining factor. For example, the international scenario is still uncertain," said Flavio Serrano, economist at BES Investimento in Sao Paulo.

Brazil's benchmark Selic interest rate currently stands at an all-time low of 8.75% per year but, according to a central bank survey of economists released this week, the rate will rise to 11.25% by the end of the year as the monetary authority seeks to control inflation.

Meanwhile, the IBGE adjusted its December retail sales figure, which it now sees falling 0.7% instead of 0.4%.

The January numbers showed month-on-month sales rose in nine of the 10 categories surveyed, led by the electronic and household goods sector, which registered 7.9% growth.

The heavily weighted supermarket and hypermarket sector registered 1.4% growth.

The retail segment was a bright spot in the economy last year and the continued expansion of real incomes and total wages hint that it will continue to be so as the government rolls back fiscal stimuli, such as tax breaks on cars, in 2010, said Serrano.

Retail sales in Brazil exceeded forecasts in January

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