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Brazilians still shopping as going gets tougher

May 14th, 2009

Brazil’s worst set of industrial employment figures in eight years are reflected in latest official numbers and though shoppers haven’t stopped filling their baskets, what they are buying may point to a subtle change in habits.

The number of workers employed in the industrial sector fell by 5% in March compared with the same month last year, with analysts saying if they weren’t already, all sectors of industry are now being affected.

Nowhere more so than automobile sector. After four straight months of rising sales, inspired by cuts in production taxes, the recent recovery shuddered to a halt in April.

Tell-tale signs are also in the steel industry, which relies on the auto sector for orders.

Producers have been running at half their normal capacity with no one in the industry prepared to make forecasts for the rest of the year.

And if that weren’t confirmation enough that the economy is spluttering, Development, Industry and Foreign Trade minister Miguel Jorge conceded Brazil is in technical recession - the first government figure to do so.

Since the onset of the global economic downturn last September sparked by the international credit crisis, economists have been whittling down their growth forecasts for Brazil from an initial 5% for 2009 to as low as a 1.4% contraction.

Photo: monkey magic, flickr

Photo: monkey magic, flickr

The forecast contraction failed to hit home in the household consumption of food, drink, health, beauty and cleaning products in the first three months of the year, as sales rose among all socio-economic classes.

Spending among the lowest income groups increased 15% in cash terms and 9% by volume, according to figures from retail analysts LatinPanel .

That word household may be a pointer to what is actually happening economists say, as people prefer to dye their hair at home rather than paying the hairdresser.

Spending on food to eat at the dinner table is also rising faster than on eating out.

“The consumer is changing habits and this should continue to the end of the year,” one economist was quoted as saying.

Not everyone is doing badly.

Given the still massive disparity between the wealthy and poor in Brazil, it’s perhaps not surprising to find upscale supermarket chain Pão de Açúcar doing well.

So well in fact, the chain tripled its profits to R$94.9 million ($44.8 million) in the first three months of this year versus the same period in 2008 on the back of cost cutting and increased sales.

Brazil’s government will hope some of that feelgood factor will be transmitted to makers of white goods such as fridges, freezers and washing machines, after it cut production taxes in a bid to boost demand.

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