Mariele Santarosa limits her social outings and shopping now that business at her Sao Paulo dental practice has dropped 80 percent in a year, a victim of Brazilâ€™s longest recession in at least a century.
â€œMany people lost their jobs and go to the dentist only when in pain,â€ said Santarosa, 35, who spent a recent Saturday morning browsing in the Shopping Center 3 mall on the cityâ€™s Paulista Avenue. â€œI also ended up cutting the superfluous. Today Iâ€™m only strolling, doing some research. Iâ€™m just looking.â€
With consumer confidence near record lows, the erosion of Brazilian shopping habits proved to be one of the most negative surprises for investors sifting through fourth-quarter results. In the consumer-services sector, mostly made up of retailers, 75 percent of companies have reported sales and earnings that fell short of analystsâ€™ estimates, the worst outcome for any non-commodities industry.
Things may get worse. Services and retail may overtake the industrial sector in contributing the most to the recession as â€œlabour market and credit conditions worsen,â€™â€™ Marco Maciel, an economist at Bloomberg Intelligence, wrote in a March 18 note.
Unemployment in Latin Americaâ€™s largest economy rose to an almost seven-year high of 8.2 percent in February. The deteriorating job market combined with the highest interest rates among major economies has led banks to tighten credit and consumers to shy away from higher-priced items such as cars and appliances.
Consumers are being careful shoppers at the supermarket too. Santarosa said she now checks deals at different grocery chains including Pao de Acucar and Extra, both brands of Cia Brasileira de Distribuicao Grupo Pao de Acucar, or GPA, as well as Carrefour and DIA, before she shops to make sure she gets the lowest prices.
Ana Maria dos Santos, 57, who collects recyclables from other peopleâ€™s garbage, has cut her grocery lists in half and prepares homemade remedies if she gets sick because she canâ€™t afford to buy medication. She said more people are strolling the streets going through garbage cans, increasing competition for decent recyclables to resell â€” another effect of rising unemployment. The city of Sao Paulo, the largest in South America, had about 16,000 homeless people as of 2015, according to a study commissioned by the city. That compares to 14,500 people in 2011, and 8,700 in 2000, the study shows.
Among the consumer-services companies that missed analystsâ€™ sales projections in the quarter were GPA and Lojas Americanas, two of Brazilâ€™s biggest retailers. Itau BBA analysts downgraded GPA on March 3 following the companyâ€™s fourth-quarter report, saying its results throughout 2015 were a â€œletdownâ€ and the tough consumer environment â€œis likely to continue to generate headwinds.â€
While sales in GPAâ€™s cash-and-carry and convenience stores grew, sales of non-food products were hurt because they are more income-dependent and exposed to credit, the company said in an e-mail. â€œThe company registered variations in performance between its formats, in line with changes in the shopping habits of the Brazilian consumer,â€ GPA said. The trend is extending into this quarter.