Low Inflation and Low Unemployment Spur Brazilian Consumers Confidence

Supermarket in Brazil Brazilian consumers' confidence in the third quarter of this year has reached the second greatest level since 2001, according to the National Consumer Expectations Index (INEC), disclosed on Friday, October 10, by the National Confederation of Industries (CNI).

When compared to the previous result, 109.8 points in July, the confidence index rose 5.3%, to reach 115.6 points. In comparison with the same month last year, when it was 111 points, the increase was 4.1%.

The research, between September 19 and 22, with 2,002 people in 141 cities in the country, shows that consumer optimism is mainly due to inflation expectations and the level of unemployment, which improved in the period.

The executive manager for economic policy at the CNI, Flávio Castelo Branco, explained that the INEC results are still very high, as the research took place during a period in which the financial crisis was getting worse. "Consumers answer to the INEC with their pockets, according to their own situation. They participated in the research at a moment of good employment and growing income," he said.

Castelo Branco evaluated that domestic demand is guaranteed in the short term. "For this year we may have maintenance of the rhythm of domestic demand. The doubt is with regard to 2009," he finished off.

All indicators that make up the index grew in September when compared to July. With regard to the same month in 2007, inflation perspectives are worse. The other indices, however, presented increases in the same basis for comparison. The research shows that, different from indices regarding inflation and unemployment, all others have reached the highest levels in the series.

The index that measures consumer intention of buying more expensive goods is also record and showed relevant growth: 4.9% in comparison with July and 8.5% as against September 2007. The expectation for greater purchases corroborates the good moment of the domestic demand, which is still heated.

The index related to inflation rose 7.1% in comparison with July, showing greater expectations, but still registering growth of 4.1% when compared to September 2007. "These figures are explained by the recent reduction of inflation indices as a consequence of lower international prices of commodities," according to the research.

The index regarding unemployment also showed great growth when compared to July (7.5% up) as against September last year (6.2%). According to the text regarding the research, "the index reflects the excellent dynamism of the labour market," which has been presenting high job generation (specially in the formal market) and greater salaries.

The index regarding income of individuals has been growing in the two bases of comparison. With regard to July, the index for evaluation of the financial situation rose 4.2%. And income expectation and debt level indices grew 4.7% and 4.8%, respectively.

With regard to September 2007, the evaluation of the current financial situation has improved 4.8%. The income expectation and level of debt indexes grew 4.6% and 1.3% in the period, respectively. These indices show the increase in income – due to salary negotiation that guaranteed increases over inflation- and good credit conditions.



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