February 9, 2018 / 11:58 AM / a year ago

UPDATE 1-Brazil retail sales rise in 2017 as interest rates fall

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By Bruno Federowski

BRASILIA, Feb 9 (Reuters) - Brazilian retail sales rose in 2017 for the first time in three years as low interest rates helped to lift the economy from its deepest recession in decades.

Retail sales rose 2 percent in 2017 from 2016, government statistics agency IBGE said on Friday, the largest increase since 2014.

With interest rates at all-time lows, consumers took out loans and purchased furniture and electrical appliances, driving a 9.5 percent increase in sales of these products.

Free-falling food prices in the wake of a strong agricultural harvest, as well as lower unemployment, bumped up sales of supermarkets, hypermarkets, foods and beverages.

But the recovery of Brazil’s services sector has been notably slower than that of the industrial sector, which has benefited from strong foreign demand.

Last week, data showed industrial output rose in 2017 at the fastest pace since 2010. December’s reading surpassed even the top estimate in a Reuters poll, suggesting manufacturers kicked off the new year on a strong footing.

In comparison, retail sales fell 1.5 percent in December from the previous month, a much larger decline than the 0.4 percent contraction median estimate among economists polled by Reuters.

The result highlights the two-track economic recovery of corporate Brazil, which for years suffered from bloated debt loads, high costs weak demand.

Nevertheless, economists expect the economy to turn that page in 2018, expanding at the fastest pace in four years. (Reporting by Bruno Federowski; Editing by Alison Williams)

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