Brazil's retail sales slip in December as slowdown signs mount

SAO PAULO, Feb 13 (Reuters) - Retail sales volumes in Brazil fell in December from the previous month, statistics agency IBGE said on Thursday, adding to signs the economy slowed at the end of last year despite a strong 2024 overall.

Sales in Latin America's largest economy were down 0.1% in December from November, the second consecutive monthly drop. Economists in a Reuters poll expected them to remain unchanged.

Brazil's economic activity has shown some signs of cooling after surprising on the upside for most of last year, with the retail sales figure adding to negative readings for industrial output and services activity in December.

The slowdown comes as the country's central bank is tightening monetary policy in order to return inflation to its 3% target.

The bank last month delivered a 100-basis-point interest rate hike for a second straight meeting to 13.25% and signaled another increase of the same size in March, extending the tightening cycle it kicked off in September.

"Today's retail sales report was the last sectoral data for 4Q, which overall highlighted increasing signs of fragility in the Brazilian economy at the turn of the year," JPMorgan economists Vinicius Moreira and Cassiana Fernandez said.

They reduced their fourth-quarter GDP growth forecast to 2% from 2.5% after the recent weak batch of data, and said there was now "meaningful downside risks" to their estimate of an agriculture-led rebound to 4% in the first quarter of 2025.

Sales at five of the eight main retail groups surveyed by IBGE were down in December from the previous month, the statistics agency said, including office supplies, pharmaceutical goods, fuel and lubricants, apparel, and food.

Brazil's retail sector is facing a "rapid deterioration," Andres Abadia of Pantheon Macroeconomics said, adding that private spending is set to weaken further in early 2025 as inflation is still high and financial conditions are tightening.

Sales in December grew 2.0% from the year-earlier period, the data showed, compared to expectations for a 3.50% increase in the Reuters poll. In the full-year, Brazil's retail sales expanded 4.7%, their largest growth since 2012. (Reporting by Gabriel Araujo Editing by Christina Fincher and Jane Merriman)