A resident of the community of Paraisópolis, in the south of São Paulo, the picker for recycling cans Célia da Costa Gomes, 40, mother of four, aged 4, 6, 7 and 10 years, is concerned. The children’s milk and “mix” to prepare meals are gone. The cooking gas is running out. The empty pantry coincides with the end of the emergency aid.
The benefit paid by the government since April to the most vulnerable Brazilians, due to the pandemic, may have a new round. But it all depends on negotiations with Congress. While this imbroglio is not resolved, as of this month Célia’s income drops to R $ 410 with Bolsa Família. Until December, she received R $ 600 per month for emergency assistance.
“These R $ 200 less make a big difference for those who have children,” says the waste picker, who lives in a house whose rent is paid by the City. Before the pandemic, Célia managed to reach a total monthly income of R $ 600, adding what she got from the sale of material for recycling and Bolsa Família. Per week, he took R $ 50 with cans. Today, however, even recycling is difficult. The number of waste pickers has increased a lot and she sees children rummaging through the streets of São Paulo looking for cans. “Without a job and without (emergency) assistance, it is difficult”, says the collector.
Célia and her children are one of the 40 million families in classes D and E. With a monthly income of up to R $ 2,600, they correspond to 53% of Brazilian households. With the end of the emergency aid, rising inflation, especially for food, and unemployment at the highest level in recent years, this must be the layer of the population that will lose the most disposable income this year, if the benefit of the aid is not resumed , points out a study by Tendencias Consultoria Integrada. Disposable income is the money left over to spend after purchasing basic items.
The study shows that classes D and E should lose almost a quarter of disposable income (23.8%) in real terms compared to 2020. There will be R $ 48 billion less circulating among the poorest. Last year, however, this was the social strata that had the greatest gain in disposable income, with an increase of 16.1% compared to 2019 due to government aid.
If the picture is maintained, this will be the biggest drop in disposable income for the classes D and E of the series started in 2008. “It is nowhere near the 5.4% decrease that occurred in 2015”, says Lucas Assis, one of economists responsible for the projection.
The study, which took into account expectations for consumer inflation (IPCA) for this year of 3.4%, economic growth (GDP) of 2.9% and unemployment rate reaching 15.1%, predicts a decline in disposable income , 3.7% of the Brazilian population as a whole in 2021, after growing 1.1% in 2020. Except for the wealthier, class A with a 1.6% increase in disposable income expected by 2021, other strata must lose consumption capacity. But the biggest fall is expected for the poorest.
Usually 80% of income from classes D and E goes to the purchase of basic items. What is left over is spent on other products and services. And this year, that surplus – R $ 156 billion – should be the lowest in the last 13 years.
According to Assis, the disposable income of the most vulnerable must be achieved on several fronts. One is the persistent rise in food inflation, items that weigh more on the budget of these families. In addition, it is known that unemployment punishes the poor more, although there is no tax per social layer. In any case, the main factor pointed out by the economist for this shock in the disposable income of the classes at the bottom of the social pyramid is the end, for now, of the emergency aid.
The reflection of the loss of consumption capacity of the poorest should, according to the economist, affect retail sales in the North and Northeast regions of the country more, where there is a greater concentration of the classes D and E.
“We felt a slowdown in the pace of sales in January, but we continue to grow,” says Van Fernandes, president of Grupo Vanguarda, of supermarket and cash and carry, with 2 stores in Maranhão and 22 in Piauí.
The chain, which earned R $ 750 million last year under the banners Carvalho Super and Carvalho Mercado and is one of the largest in the region, felt the impact on sales, especially in cash and carry stores in the interior of Maranhão, in the cities of Bacabal and Codó. “There, the end of the aid made a big difference”, says the businesswoman.
To leverage business, Van says that since the beginning of this month he has extended the payment period for purchases made with the company’s card. The 40 days without addition were maintained. But it is now possible to split up to three times interest-free purchases made on all days of the week, a possibility previously restricted to a specific day.
Another way out was to negotiate with suppliers discounts on part of the items in the basic basket. The rebates are paid for by industry and retail. “Since there is not so much money circulating in the economy, I need to reduce the margin to keep billing and the consumer.”
David Fiss, director of customer services and business at consultancy Kantar, which specializes in consumption, says that today the industry is concerned with promotion and the goal is to keep consumers buying, even with the lowest disposable income. “There are industries that lower the price of one product category and increase the price of another to keep the business healthy.” There are also manufacturers who choose to reduce the size of packaging to offer an affordable price to the consumer’s tighter pocket.
Retail sectors that did well already feel the economic slowdown
Consumer experts say the first quarter will be difficult for retailers, which in 2020 surfed the wave of changing consumer habits and emergency aid.
” The positive shock that occurred in retail based on these two pillars has been exhausted”, says the chief economist of the National Confederation of Commerce of Goods (CNC), Fabio Bentes.
For David Fiss, director of consultancy Kantar, depending on the segment, consumption will skid because of the end of the aid, high inflation and the slow speed of immunization of the population, today a passport to the resumption of activity.
Sales of cleaning items and beverages, for example, are expected to grow, but building materials, electronics, furniture will decline. “There is a brake on the segments that have done well and it is difficult to expect a new wave of consumption of these items going forward”, says Bentes.