Retail sales in Brazil fell 0.8% in July from June, seasonally adjusted, the IBGE statistics agency reported on Tuesday (Sept. 15). The drop was worse than expected: economists polled by Reuters had forecast a 0.2% decline. It was the sector's weakest monthly performance in three months, according to a Reuters report published by Folha de S.Paulo.

Sales fell in 5 of the 8 activities tracked by the IBGE's monthly retail survey, known as PMC. Furniture and household appliances led the decline, down 4.9%, followed by books, newspapers, magazines and stationery (-4.2%) and fabrics, clothing and footwear (-2.7%). Pharmaceuticals, medical goods and cosmetics rose 0.6%, as did office and computer equipment; fuels gained 0.3%.

Compared with July 2025, without seasonal adjustment, sales volume rose 1.2%, also short of the 2.15% analysts had expected. For the year to date, retail is up 1.8%, and up 1.6% over 12 months. Broad retail, which adds vehicles and construction materials, rose 0.4% in July from June, with vehicles, motorcycles and parts up 0.3% and construction materials up 0.7%.

High rates still weigh on consumers

July brought the second monthly drop of the year, after a 1.1% fall in April, and ended two months of growth; June had risen 0.3%. The reading adds to signs of a slowing economy: in the second quarter, household consumption fell 0.4%, its first contraction in three quarters, according to GDP data released in early September. Analysts cited by Reuters point to tight monetary policy, with Brazil's benchmark Selic rate at 14%, as the main brake on credit, despite a strong labor market and easing inflation. The central bank's rate-setting committee meets on Wednesday (Sept. 16), and markets expect a 0.25-point cut.

"The July drop raises concern about the sector's performance going forward," said Matheus Pizzani, an economist at the fintech PicPay, in comments cited by Folha. The decline came in what he called a benign month, with food prices down 0.67% and fuel prices down 1.44%. Once those tailwinds fade, he argued, current supply and demand conditions are unlikely to reverse the picture, and retail may keep undershooting and drag on GDP.

For producers, the sectors that fell hardest, from furniture and appliances to clothing and stationery, rely on stores as their main sales channel, and weaker shelves tend to translate into smaller factory orders. For consumers, the picture combines a resilient job market, as the Reuters report notes, with expensive credit: installment plans should only get cheaper once rate cuts work their way through the cost of borrowing.