Brazil: Three out of four São Paulo City inhabitants are in debt

A survey by the Federation of Commerce of Goods, Services, and Tourism of the State of São Paulo (FecomercioSP) shows that three out of four São Paulo City inhabitants (Paulistanos) had contracted some debt in July.

The percentage of households with debt jumped from 74.1% in the previous month to 75.4% in July, a record for the historical series, which began in 2010.

According to the Survey of Consumer Indebtedness and Delinquency (Peic), there are 393,000 more indebted families than in the same month last year.

The most frequent types of debt are credit cards (83.1%), installment plans (18.5%), and car loans (14.5%). Personal credit reached 11.5%, the highest level since June 2018.

Despite the record, FecomercioSP economist Guilherme Dietze believes the year’s second-half trend is positive.

“The high indebtedness started last year because of the very low interest rates. What I see, as of now, is an improvement in the economy and, with inflation dropping and employment also improving, the tendency is that there won’t be more defaults even with high indebtedness,” Dietze says.

When the consumer has overdue debts, the default rate remained close to the maximum of the historical series, fluctuating from 23% in June to 23.2% in July. The percentage of respondents who declared they could not pay their overdue debt remained practically unchanged, from 10.7% to 10.8%.

The survey shows that both richer and poorer families went into debt to maintain their consumption levels. Among those who earn more than ten minimum wages, the percentage reached 69.5% in July, also the highest level in the historical series. Among those who earn less than ten minimum wages, indebtedness reached 77.4% last month.

Another indicator, the household consumption intention indicator (ICF), also dropped during the month. It shows 82.4 points, a drop of 0.2 points compared to June. Among its highlights were the current employment and professional prospects components, which rose to 112.8 and 116.7 points, respectively.

On the other hand, the current level of consumption and the consumption perspective dropped to 58.9 points and 76.4 points, respectively. Numbers above 100 indicate satisfaction.

Regarding the ICF, Dietze also believes in a more accelerated improvement in the coming months. “It had been rising very slowly, but now that employment is better and inflation is slowing down, I believe the pace of increase will be more significant.”

With information from Valor Econômico