Brazilian households start to save.

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The expansion of Brazil’s economy in the last decade was mostly home-grown based on increased household spending of the emerging middle class. This trend may come to an end as Brad Haynes and Vivian Pereira from “Reuters” analyze recent indicators.
 
Consumer confidence, in the last two years fueled by a credit boom, tax breaks, and wage hikes, helped Brazilian retail to grow steadily with yearly increases in sales of close to 10 percent. This trend broke in 2012, in which household consumption most likely grew less than 3 percent and consumer defaults on credits rose 15 percent. Brazilian household debt doubled since 2005. Despite this cooling and correspondingly modest holiday sales, companies remain upbeat and will expand or open new locations. Some durable goods and clothing retailers plan to open more than one new store every week in 2013. This planned expansion seems overly optimistic looking back at only slow growth for existing stores. In addition, unemployment is currently at an all-time low which drives up costs.
 
Brazilian retailers expand significantly in a cooling economy. This is contrary to conventional wisdom. However, Brazilian retail still lacks the homogeneity found in other countries in which very few companies dominate the markets. In Brazil regional players still play an important role. Therefore, the major players can hardly wait for better times to extend their reach and gain the benefits of an economy of truly national size. However, with certainty the dream of national market leadership for some will face the harsh reality of aggressive competitors and shrinking margins due to intense competition.