August 15, 2017 / 1:24 PM / in a year

UPDATE 1-Brazil retail sales jump in June, boosted by cheaper credit

SAO PAULO/RIO DE JANEIRO, Aug 15 (Reuters) - Retail sales in Brazil rose more than expected in June, government data showed on Tuesday, suggesting the central bank’s string of large interest rate cuts may be starting to boost the economic recovery.

Sales volumes excluding cars and building materials rose 1.2 percent from the preceding month after seasonal adjustments, the government statistics agency IBGE said. That followed an upwardly revised increase of 0.2 percent for May.

The June advance handily beat the median forecast of a 0.4 percent in a Reuters poll of analysts.

June sales grew 3 percent from the year-earlier month, beating expectations of a 1.9 percent increase. It was the strongest year-on-year performance since May 2014.

IBGE economist Isabella Nunes said lower interest rates drove a 13 percent decline in average household credit costs, spurring purchases of durable goods such as hardware and home appliances.

The central bank has cut its benchmark Selic interest rate by 500 basis points since October as inflation abated due to a deep recession.

Nunes said the June 12 Valentine’s Day celebrations also stoked retail sales.

Retail sales increased 2.5 percent in the second quarter from the same period a year ago, bucking a stretch of nine straight quarterly declines.

A broader retail sales measure that includes cars and building materials rose 2.5 percent in June from May and 4.4 percent from a year earlier.

Yields paid on interest rate future contracts opened nearly flat as traders saw the better-than-expected retail data as unlikely to deter the central bank from extending its rate-cutting cycle.

Economists polled by Reuters expect the Selic rate to end the year at 8 percent from the current 9.25 percent. (Reporting by Bruno Federowski and Rodrigo Viga Gaier Editing by W Simon)

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