Releases - 05/24/2017

FECOMERCIOSP – Projections of the retail for the end of the year and 2017



Fábio Pina, Economic Advisor of Trade Federation of Goods, Services and Tourism of the State of São Paulo (FecomercioSP)

It is not news to anyone that the year 2017 will still be a period of drop in sales, especially for those sectors that depend heavily on available credit and consumer confidence. This is the case of consumer electronics segment. The products, on average, have high value and are mostly funded. They are also not considered essential, at least not in a country like Brazil, where the per capita income is below R$ 10,000 and at a time of crisis that culminated with the stock of 12 million unemployed this year. I.e. the acquisition of consumer electronics or home appliances not seem to be consumers’ priority. This segment was not more affected by the crisis than the real estate and automotive sectors.

This is the starting context for an assessment of prospects. If the retail in the state of São Paulo should see its turnover close out stable this year (0% up to 2% over the year 2016) and record decrease of 6% to 8% in Brazil after two years of sharp declines, in the electronics segment, the scenario is even more dramatic: 15% drop in São Paulo and up to 20% of sales in Brazil. In Sao Paulo, the retail in general began to show reaction in the second half of this year, but absolutely located in supermarkets and pharmacies. This means that there is a reaction, but that is limited to essential items, which can not be overlooked by consumers. Or, as they say in economic language, low elasticity of demand items. A family may decide to postpone the exchange of a refrigerator (in most cases) or decide do not purchase a new TV, but cannot stop going to the supermarket or pharmacy. This is the reason why these sectors have such a distinguished performance in times of crisis.

The recovery, which begins by essential sectors, if it occurs within the most likely scenario of political pacification and approval of the most urgent reforms, such as tax, social security and labor, will spread obviously for consumption segments more “sophisticated “. However, this recovery will gradually occur over 2017. Of course, by comparison base effect; it may be that in the first half of the year, some numbers indicate sales growth of consumer electronics items, but much due to the poor performance, that is affecting the industry since 2015. In fact, grow slightly, after dropping that much, is not enough to be a cause for celebration. However, it is worth initiating a recovery, albeit timid, as soon as possible.

The Federation estimates that in 2017 the recovery will happen systematically at retail. After consolidating the non-durable goods and in a more favorable political and business environment, the growth will spread to the semi-durable goods sector (clothing and accessories) after that, most likely with relevance in the second half reaches the segments of durable goods, such as automotive and consumer electronics. Before that, is not possible to believe that faced with a huge unemployment rate, the significant cut in lines of credit and doubts that still remain about the government’s ability to enact reforms, the consumer will be able to great adventures.

This year, if Christmas does not promise to be a time for effusive celebrations, it brings at least the hope that the country starts 2017 with much better prospects than in recent years. The first scenario will stop to get worse before it gets better for many companies. It is a positive sign, after more than two years of deep crisis.

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