Brazil’s retail sector is grappling with declining confidence as economic challenges intensify. The National Confederation of Commerce in Goods, Services, and Tourism (CNC) reported a 2.1% drop in the Business Confidence Index for Retailers (Icec) in February 2025 compared to January, bringing it to 103.7 points.
This represents a 5.4% decline from February 2024, reflecting growing caution among business owners due to high interest rates and inflation. The country’s elevated Selic rate, currently at 13.25%, is a major factor behind this decline.
CNC’s chief economist, Felipe Tavares, emphasized that the high borrowing costs are hitting retailers hard, particularly those selling high-value goods like electronics, vehicles, and construction materials.
These categories saw a 5.3% drop in activity in February compared to the previous month, underscoring their vulnerability to rising interest rates. The Icec’s three main components—current conditions, expectations, and investment intentions—highlight the sector’s struggles.
Current conditions fell by 4.4% from January and 10.1% year-over-year. Expectations dropped by 1.7% monthly and 6.4% annually, while investment intentions remained flat but uninspiring. These figures reveal a lack of optimism among retailers amid ongoing economic uncertainty.
Brazil’s Consumer Confidence Falls as Inflation
Consumer sentiment mirrors these challenges. The FGV-IBRE Consumer Confidence Index fell to 83.6 points in February, its lowest level since August 2022, as inflation and high borrowing costs weigh on household budgets.
Inflation remains above the Central Bank’s target of 3%, with projections for 2025 around 5.5%. Major retailers are adjusting strategies to navigate this environment.
Carrefour has reduced its store expansion plans for 2025 due to rising debt costs. Meanwhile, GPA is focusing on premium products that are less sensitive to economic fluctuations.
CNC President José Roberto Tadros noted that elevated interest rates and fiscal challenges are driving this cautious approach among businesses. He stressed that restoring optimism is critical for boosting investments and fostering growth in Brazil’s retail sector as it faces continued economic headwinds.