In Brazil, Household Monthly Purchasing Power Plunges by R$ 16 Billion

07/28/2015 - 10h17

The goods and services consumption of Brazilian families over the last month has shrunk by R$ 16 billion (US$4.7 billion) this year .

With rising inflation and unemployment, in addition to credit constraints, the purchasing power of families, which have been the main driver of the economy in recent years, is in its first decline since 2003 and should remain low in the coming months.

A study by Tendências consultancy, obtained by Folha, shows that households' purchasing power was R$ 240 billion (US$ 71.3 billion) in the monthly average from January to May -6.2% lower than in the same period in 2014 (R$ 256 billion, or US$76 billion).

"After years of increasing consumption, it is difficult to admit to the empoverishment of Brazilians, but that's exactly what's happening," said Rodrigo Baggi, an economist at Tendências.

In May alone, the purchasing power was R$ 229 billion (US$ 68 billion), which represented a setback to the level recorded in January 2012 (R$ 228.5 billion or US$67.9 billion).

To get to these numbers, the consultancy considered the total income of families (including social security benefits), discounting inflation, credit offer (with real estate) and families' expenses with debt payments.

Households' purchasing power has plunged because inflation has eroded the income of Brazilians and the pace of new credit awards has slowed down - a fundamental component to consumption.

In Tendência's projections, purchasing power will plunge further to 6.1% at the end of the year, in contrast to 2014. Next year, with the expectation of a slowdown in inflation, the purchasing power may see a small increase of 0.6%.

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