Tremendously indebted and ready to spend more – 08/27/2023 – Marcos de Vasconcellos

Since April 2015, Brazilians haven’t had as many plans to spend more money as they do now. You didn’t read it wrong and who said that was a survey by the CNC (National Confederation of Commerce in Goods, Services and Tourism). The ICF (Family Consumption Intention) reached its highest level in eight years.

As a curiosity, in April 2015, we had an inflation of astronomical 8.17% accumulated in 12 months (today, it is 3.99%). An interest rate (Selic) of 12.75% per annum (0.5 percentage points below the current 13.25%).

Consulting the history of the Central Bank’s Boletim Focus, one can feel a certain “optimism” in the market at the time. Promptly frustrated by reality. The table below shows how experts expected the year to end and how it actually ended, in the midst of Dilma Rousseff’s (PT) impeachment process.

Indicator	Expectation in April 2015	Reality at the end of 2015
Inflation (IPCA)	8.2%	10.67%
Selic target	13.25%	14.25%
Dollar	BRL 3.25	BRL 3.90

_{Source: Focus Bulletin}

Now, we have this new increase in consumption intentions, just when we reached the sad record of the percentage of families that find themselves unable to pay overdue debts: 12.2%. It has never been so high since the beginning of the series in 2010, according to the same CNC.

Overall, we’re heavily in debt and ready to blow more money. Who benefits from this?

Desenrola Brasil, the government’s debt renegotiation program, gives a boost to new purchases. By clearing people’s names in credit restriction services, the PT government supports the thesis that we will go through a new period of incentive to consumption.

The fact that the fiscal framework does not provide for the so-called “crime of responsibility” in case of non-compliance with its targets left a flea behind the ear of financial market managers, who already expect an increase in cash injections into the economy.

With an eye on this perspective, it is interesting to note that stocks linked to retail and consumption are still under more pressure than the stock market in general. The Ibovespa —the main indicator of our market— has risen by more than 8% since the beginning of the year. Icon, an index that gathers only stocks linked to consumption, rose only 1.4%.

Far beyond the obvious Magazine Luiza and C&A, this index has papers from industries linked to food, such as Ambev and Camil; construction companies, such as Gafisa and Even; health plans, such as Hapvida and Qualicorp; car rental companies and much more.

In the last 13 years, from 2010 to 2022, Ibovespa has only done better than Icon five times. In all these years, the Ibovespa rose 58%, while this group of companies linked to consumption registered an increase of 74%.

Lower interest rates, like the one we are starting to see now, usually improve the scenario for retailers, increasing sales volume, profit margins and lowering the cost of debt.

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