Consumers become more cautious due to fear of unemployment

After companies and the financial market, it is time for consumers to soak their beards. A survey carried out by the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV Ibre) revealed that in October there was the first decline in consumer confidence in four months, which fell to the lowest level since June.

Confidence indices are relevant for estimating the future behavior of the economy. When they fall, they indicate less consumer willingness to spend – especially on more expensive goods and services, generally purchased in installments.

The main concern of consumers is the job market. Although unemployment fell from 8.7% in the third quarter of 2022 to 7.7% this year, according to the Brazilian Institute of Geography and Statistics (IBGE), the labor force participation rate fell from 62.7 % for 61.8% of the population over 14 years old. This means that, proportionally, fewer Brazilians of working age are working or looking for a job.

Other reasons that contribute to consumer apprehension include:

• the high level of debt and default;
• the limited impact of the drop in interest rates, which began in August; It is
• the uncertainties generated by the conflict in the Middle East between Israel and the terrorist group Hamas.

This conflict could pressure an increase in the price of a barrel of oil, influencing the rise in inflation and reducing the possibility of a more pronounced drop in the basic interest rate, the Selic.

Expectations for the coming months also worsened among consumers. Economist Anna Carolina Gouveia, from FGV Ibre, highlights that consumer pessimism is widespread across all income and capital classes, raising a warning signal due to concern about the resilience of the job market, an important factor in recovering confidence .

It is important to note that this survey does not consider the statements made by President Luiz Inácio Lula da Silva (PT) on the 27th, when he declared that it will be difficult to eliminate the deficit in public accounts in 2024. According to him, the priority will be to make investments and Public spending. Next year will be one of municipal elections.

Even though the government has formally decided to maintain the zero deficit target, distrust over Lula’s commitment to public accounts tends to persist, given his repeated statements extolling the importance of public spending for the economy.

Household purchasing intentions have the lowest increase since October 2022

Household purchasing intentions, measured by the National Confederation of Commerce in Goods, Services and Tourism (CNC), had the lowest increase in October since the same month in 2022. While interest rates are falling and debt renegotiation campaigns facilitate access to credit for part of the population, financial institutions remain selective due to persistent default.

High debt and default continue to limit families’ consumption capacity, reducing the positive effects of the slowdown in inflation on disposable income.

Izis Ferreira, economist at CNC, observes that the slowdown in the pace of formal hiring with a formal contract is leading consumers from all income groups to look cautiously at employment in the coming months – the indicator that measures the professional outlook recorded a drop of 0 .7%.

Brazilian is less optimistic and worsens Haddad’s assessment

Research carried out by Genial Investimentos/Quaest, released at the end of October, showed that 65% of respondents believe that the economic scenario has remained the same or worsened in the last 12 months, which represents an increase of three percentage points in relation to the previous survey carried out in August, and above the survey’s margin of error, which is 2.2 percentage points.

Expectations regarding the future also worsened. Optimism regarding the next 12 months decreased from 59% in August to 50% in October, while those who believe that the situation will remain stable or worsen went from 38% to 46% of the total.

The Genial Investimentos/Quaest survey also points to a slight increase in the fear of unemployment. In June, 37% of those interviewed expected an increase in the unemployment rate, and in October this percentage reached 40%, while the expectation of a drop in unemployment fell from 32% to 27%.

The “grade” of the work carried out by the Minister of Finance, Fernando Haddad, also worsened. Those who consider his work negative increased from 23% to 26%, the same percentage as those who consider his work positive. The percentage of those surveyed who consider the minister’s performance to be regular fell from 32% to 30%.