Retail Recovers in July, But High Interest Rates Hinder Installment Consumption

Brazil's domestic consumption dynamics show clear signs of structural bifurcation, with the Stone Retail Index posting a 0.9% advance in July compared to the previous month, marking the second consecutive monthly gain. However, this superficial expansion masks deep sectoral asymmetry, driven exclusively by the inertia of the wage bill and formal employment, while credit-dependent categories remain suffocated by monetary tightening. Year-to-date, the indicator rose 4.7%, slowing from 5.4% in the previous period, reinforcing the fragility of the ongoing recovery and the vulnerability of lower-income families. This partial resilience occurs in a macroeconomic environment marked by the Selic rate at 14.00% per year, keeping credit costs prohibitive for the final consumer. Meanwhile, 12-month IPCA inflation stands at 4.44%, creating a scenario where inflation cools slightly, but real purchasing power remains squeezed by high benchmark rates. The commercial exchange rate closed at R$ 5.2236, adding volatility to the cost mix. Essential segments like pharmaceuticals (+2.5%), fuels (+2.1%), and supermarkets (+1.6%) led gains, while debt-dependent sectors suffered sharp drops, such as textiles and apparel (-4.1%) and furniture and appliances (-2.2%). Analysts project continued volatility, with a real possibility of negative monthly retail results as early as August.