Consumer spending starts to soften

EM consumer spending has been one of the bright spots in the global economy in recent years, supported by healthy wage growth, low unemployment and loose monetary policy. But retail sales growth tailed off in early 2013. In aggregate, sales growth fell to a three-month average of 7.6% y/y in February, the slowest pace since October 2009. One reason for the slowdown has been a turn in the credit cycle. The most pronounced consumer slowdown has been in Latin America (see Chart below), where a lending boom appears to be cooling. Household balance sheets look stretched in many Latin American countries, especially Brazil, suggesting credit growth will slow further.