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Economic indicators

Consumer avoids further indebtedness

09/09/2016

This article was translated by an automatic translation system, and was therefore not reviewed by people.

 

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Source: Estadão

 

A recent Central Bank survey showed that household indebtedness, down from 43.7% in June, fell by 0.9 percentage point from last December and 2.2 points from June 2015, reaching the lowest level Since December 2012. This is not the only survey on the consumer's financial situation - others point to a worse picture - but it reinforces the sign that families avoid contracting new debts until they improve the prospects of employment and income. 

The level of indebtedness determined by the Central Bank (BC) takes into account the balance of the debts of the families in a given month, compared to the accumulated income in 12 months. If borrowing declines, this is a sign that the consumer is making a huge effort to adjust and avoid default. 

Research by the National Confederation of Commerce (CNC) showed a reduction in indebtedness in the annual comparison: in August 2015, 62.7% of households were indebted, a percentage that fell to 58% in August 2016. There was, however, a small increase 0.3 percentage point compared to July. 

Another survey, commissioned by FecomercioRJ, indicated that 24% of the respondents increased their debts, while only 15% managed to reduce them. Among these, many had to use financial reserves to not become defaulters. 

The BC separates the debts for the purchase of the house of the others. Debts excluding real estate financing declined more sharply, from 27.2% to 24.9% between June 2015 and June 2016, which is a good sign. These debts have an average cost much higher than real estate debts, which, in turn, mean investment, because those who acquire a property can get rid of the rent. 

By taking out old debts, the consumer makes room to take on new debts - and this is likely to happen as soon as interest begins to fall and the economy rehearses, making employment and income more predictable. For now, interest rates are still high, discouraging borrowing. The consumer should avoid paying high interest rates, as forecasts are for the fall in the base rate, especially in the coming year. 

The latest Focus bulletin from the Central Bank predicts that the basic interest rate will fall from 14.25% per year today to 13.75% in December and 11% at the end of 2017. The only thing missing is the pass-through of the fall to the consumer.

 

Source: Idec

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This article was translated by an automatic translation system, and was therefore not reviewed by people.

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