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Brics slowdown rings alarm bells
Consumers in the world's biggest emerging markets take a step back, raising concern
Retail sales have started to flag across the leading emerging nations, fuelling fears that these fast-growing economies may no longer offset weak growth in the struggling developed world.
Waning consumer confidence across the so-called Brics – Brazil, Russia, India and China – is driving the slowdown in spending, according to analysts. But they played down fears of contagion between the industrialized and emerging economies, saying each economy was struggling with its own internal issues.
The picture is clearest and bleakest in India, where annual car sales in the year to the end of March are tipped to fall for the first time in a decade.
New car purchases – a key economic barometer in one of the emerging world’s most heavily spending-oriented nations – plummeted 25.7% year-on-year in February, the sharpest decline in 12 years and the fourth consecutive monthly slide.
India’s government expects GDP growth of 5% in the fiscal year to March 31, the slowest pace of expansion in a decade
“Slowing car sales reflect a slowing economy and higher inflation,” said Deepak Lalwani, founder of India-focused brokerage Lalcap. Lalwani warned of a vicious circle, in which consumers cut their spending and factory owners stopped investing. “Everyone is worried about their jobs in the current economic climate, so no one is spending.”
The picture is just as bleak across much of the rest of the Brics. In China, retail spending grew by 12.3% year-on-year in February, according to Beijing’s National Bureau of Statistics, trailing projected growth of 13.8%. Many blamed the administration of Xi Jinping and Li Keqiang, incoming president and premier respectively. Both have clamped down on luxury spending, notably high-end meals and couture goods.
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Even Russia, a country highly dependent on its twin economic engines of petroleum sales and discretionary spending, is struggling to convince its consumers to buy. Russian retail sales grew by just 3.5% in January year-on-year, down from 5% the previous month, according to the Federal Statistics Service in Moscow.
Charles Robertson, an economist at Russian investment house Renaissance Capital, pointed to food prices, which rose 8.7% year-on-year in February, having bottomed out at 1.2% last April, as one of the reasons.
The same story is on display in Brazil, where consumer confidence fell in February for a fifth straight month, marking the longest decline since 2005. Figures yesterday showed that retail sales rose 0.5% between December and January, offsetting a decline of 0.4% in the previous month.
However a breakdown of the figures indicated that the strength of the economic recovery in the powerhouse of the Latin American region was still fragile. The so-called broad index that includes sales of cars and building materials rose 0.3%, down from a rise of 0.8% in December.
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