Brazilian consumers starting to feel the strain

The recent slump in retail sales in Brazil probably overstates the true weakness of consumer spending. Nonetheless, putting to one side the volatility of the monthly data, there are signs that Brazil’s consumer boom is starting to fade. And while this may be due in part to a spike in inflation, which should prove short-lived, there are also more fundamental factors at play, which will ensure that consumption grows at a more modest pace over the coming years.