With less than a week until Christmas, Brazil's retail market is showing signs of optimism. According to forecasts by the National Confederation of Trade in Goods, Services, and Tourism (CNC), this year's Christmas season could witness the most active sales season since 2014.

Data from the National Confederation of Trade in Goods, Services, and Tourism indicates that total sales for this Christmas season are expected to reach close to 73 billion Brazilian reais, representing an increase of approximately 2% compared to the same period last year.

Surveys conducted by the Rio de Janeiro State Trade Union reveal that favored items among consumers include clothing, footwear and accessories, toys and small gifts, perfumes and cosmetics, as well as electronics. In Rio de Janeiro, about sixty percent of residents stated that they plan to purchase gifts this Christmas, slightly higher than last year. However, the average gift budget per person is declining, dropping from 312 reais last year to 293 reais this year.

With the payment of the 13th-month salary, retailers report a significant increase in foot traffic in commercial centers, especially in the days leading up to Christmas. Merchants in São Paulo's largest bargain shopping hub, Rua 25 de Março, anticipate an 8% increase in sales. Products featuring cartoon characters are among the best-selling items for children.

Data suggests that growth in the retail sector during the Christmas season is primarily driven by food, clothing, footwear, and accessories. Overall, sales in December typically increase by around 25% compared to November, with the apparel and accessories segment potentially experiencing an increase of up to 80%.

Despite this seasonal recovery, the overall economic environment poses challenges to consumption, primarily influenced by rising credit costs. Data from the Central Bank of Brazil indicates that the average annual interest rate on personal loans has risen to 58.3%, the highest level since 2017. This not only increases default risks but also dampens willingness to consume high-priced goods.

However, the relatively stable job market provides some support for consumption. From June to September this year, the national unemployment rate decreased to 5.6%, with a 5.5% year-on-year increase in total real income.

The National Confederation of Trade in Goods, Services, and Tourism also points out that 30.5% of Brazilian consumers currently have overdue debt issues, with an additional 13.2% stating their inability to repay debts, both reaching historical highs.

On the other hand, there is an expectation for a slowdown in the price increase of Christmas-related items. According to the Extended National Consumer Price Index (IPCA-15), as of December this year, prices of the most common Christmas consumption categories have cumulatively risen by 2.5% over the past 12 months, significantly lower than the 6.1% increase during the same period last year. Notably, categories such as jewelry and accessories, cosmetics, and books have seen more significant price increases.