At less than a month and a half away from Christmas, the market of high-priced consumer good items is in some type of a “heavy-sales-discounts” mode, says newspaper Estadao. Real estate, cars, electronics and furniture items are being offered with massive discounts and the payment conditions are further relaxed in what is usually characterized as the best sales period of the year for retailers and the economy in general. In past years, this (holidays) was the time when prices rose and payment arrangements tightened, but that’s not what it’s been seen this year.
According to experts, heavy discounts like these reflect the change in the economic scenario. Until July, the market projection for the 2011 GDP growth was 4.6%, and today it is 3.2%, according to the Focus Bulletin of the Central Bank (BC). This change has increased the inventory stock of high value items, and the costs to maintain it is high.
In the last couple weeks alone, three builders – Even, Gafisa and Eztec – cut their prices by up to 36% for a group of new developments. A high-end apartment (“cobertura”) which cost BR$4.2 million a few months ago, is now offered for BR$2.8 million. Another apartment in Sao Paulo, priced initiailly at BR$425.600, now goes for BR$383.100.
“There was an excess of optimism in various sectors of the economy, which clearly caused planning mistakes” says the partner of RC Consultores, Fabio Silveira. According to him, this is nos a “liquidation” but a “strong adjustment” in production, which should be intensified in the coming months because of the deceleration of labor income, which is the fuel of consumption. In December 2010, overall income grew 15.8% compared to this year’s 8.6% growth projections.
GDP Contraction? The pace of change in activity was observed by the chief economist at LCA Consultores, Braulio Borges, based on IBC-Br, a GDP leading indicator of GDP. According to his studies, in four of the last five months to October, GDP contracted when compared to the previous month. “The activity has been showing a tendency to contract, it is no longer decelerating”.