What happened to consumption after the end of the restrictions: sectors in decline and expectations for recovery
Retail consumption showed an unexpected slowdown in April, especially after the announcement of the lifting of the exchange rate restrictions , and the market's reaction was immediate . In the first two weeks of the month, sales maintained sustained year-on-year growth, but the second half saw a widespread decline, hitting key sectors such as household appliances, clothing, and shopping malls.
The reasons are multiple, ranging from changing expectations regarding the dollar , rising interest rates that made financing more expensive, and the new floating exchange rate regime. Although there is no single cause, the commercial sector's assessment is unanimous: April ended with a sharp slowdown.
We continue to remove taxes that hindered exports and limited the growth of thousands of businesses. The elimination of withholdings affects products that exported more than USD 3.8 billion in 2024.
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The announcement of the end of the currency controls came on Friday, April 11, and over the weekend, sales soared due to expectations of a possible rise in the dollar. However, the exchange rate remained stable, and even fell, as it did this Wednesday. From then on, consumption came to a standstill.
"Consumption in April saw a before and after the announcement. We don't know if that was the reason, but from that moment on, we had to start lowering prices because nothing was selling," acknowledged a household appliance company.
Another factor complicating the outlook was the rising cost of credit. The rise in interest rates caused retailers to begin restricting plans with 3, 6, or 12 interest-free installments. This option, which had been key to sustaining consumption in the first months of the year, lost momentum.
One chain acknowledged that "sales are heavily supported by credit" and that "what had been growing was significantly curtailed by the rates." The impact was felt across all categories, from household appliances to clothing. Some stores report that the year-over-year decline went from 60% to 30% in just two weeks.
In this context, the retail sector is betting everything on the next edition of the Hot Sale, which begins on Monday. "It's going to be very aggressive, with discounts of between 40% and 50% and up to 12 interest-free installments. It's the only way to make up for what wasn't sold in April," the sector emphasized.
In the textile industry, they also acknowledged a sharp decline in sales, although they emphasized that "it was already weak before the end of the restrictions." For one source in the sector, what we see now is "more concern, less money, and more spending controls." This perception is echoed in large shopping centers, where they report a drop in sales "across all categories" in April.
The change in the exchange rate regime, coupled with a more restrictive monetary policy, appears to be generating a readjustment in consumption. While inflation is beginning to subside, as shown by preliminary data for April and projections for May, the recovery of purchasing power is still gradual. The government, however, maintains that progress is being made in the right direction: fiscal balance, an end to monetary issuance, and monetary stability are the conditions for a sustainable recovery.
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