With unemployment and inflation, Brazilians go into debt and use the card

According to a CNC survey, 82.7% of households have credit card debt. Photo: Michal Jarmoluk / Pixabay

The combination of high inflation and difficult labor market is pushing more Brazilian families into debt. A survey carried out by the National Confederation of Trade in Goods, Services and Tourism (CNC) shows that in July, 71.4% of families were in debt. This is the highest index since 2010. The record has been broken for three months.

One of the groups most affected is that of families earning up to ten minimum wages. It went from 69% in July of last year to 72.6% in July of this year. The rise in inflation – which reached 8.99% on the cumulative 12 months, according to the Brazilian Institute of Geography and Statistics (IBGE) – does not leave any respite for these families.

“They spend more to consume the same thing. And, often, the money does not arrive until the end of the month, ”explains economist Izis Ferreira of the CNC.

One of the most popular credit terms is the card. According to the survey, 82.7% of families have debts in this line of credit. Data from the Central Bank (BC) show that in June, credit card financing amounted to R $ 38.57 billion, the highest value since August 2020. Concessions (new loans) increased by 21.3% compared to the first quarters of 2020 and 2021.

The confederation recalls that this means of payment is the most widespread because of its ease of use, but it is also the one that offers the highest cost to the user, especially if the consumer uses revolving credit – personal loan very short term, in which part of the debit balance is carried over to the month following the due date of the invoice.

Even among the highest income families, there is an increase in debt, which has gone from 59.1% in July 2020 to 66.3% now. “They benefited from the forced savings made during the pandemic and are now using it to finance the purchase of cars and real estate.”

“Forced savings” and services must guarantee consumption in 2021

It is precisely this forced saving that should curb consumption in the coming months, as the pressure on real income (already discounted for inflation) should persist, given the high inflation and unemployment, stress economists Marco Caruso and Lisandra Barbero, Original bench. The unemployment rate was 14.6% in the quarter ended in May.

At the end of July, deposits in savings accounts reached 1.3 trillion reais, the highest level in the historical series, according to the BC. And, in June, 6.6 trillion reais were invested in investment funds, according to the Brazilian Association of Financial Market and Capital Entities (Anbima).

Another factor expected to drive consumption is the service sector, which tends to benefit from the lesser mobility restrictions caused by the Covid-19 pandemic. The services offered to families, such as accommodation and food, could increase in the coming months. Until May, they were down 28.7% in 12 months. “The reopening is underway and there is suppressed demand for items such as recreation and tourism,” Caruso said.

Income commitment with debt goes yellow for 2022

But the yellow light could be triggered in 2022, as debt is at high levels. The income commitment of indebted families to the National Financial System (SFN) in April was over 30% for the eighth consecutive month. “This limit is considered ideal,” says economist Luiz Rabi of Serasa Experian.

The positive fact is that the defect is contained. According to the CNC, 25.6% of families are in default, 0.7 percentage point below that recorded in July 2020. At the same time, the default rate for credit portfolios with free resources was at 4.12% in June, according to BC, and very close. upstairs registered in january.

One factor that economists at Original Bank said contributed to this low default scenario was the adoption of debt renegotiation programs for individuals and businesses.

A complicating factor, they say, is that unemployment is expected to decline slowly in the coming months, due to the rise in the Selic, which has reached 5.25% per year. The statement released after the Monetary Policy Committee (Copom) meeting points to further interest rate hikes, which could push the rate to levels that could restrict economic activity.

The rise in Selic may also worsen default dynamics as it helps to increase the interest “spread” – the difference between what is charged to customers and the cost of funding, Caruso points out. Another problem pointed out by Lisandra is that the labor market reacts more slowly to the economic recovery, due to the difficulties of hiring and firing.

The rabbi is more optimistic. He predicts that delinquency should stabilize at low levels, due to income growth and the trend towards more controlled inflation in the coming months. A British Columbia survey of financial institutions published in the Focus Report indicates that the midpoint of inflation expectations in 2022, which had been high for three weeks, was 3.85%. The median expectation for next year’s GDP, meanwhile, is 2.05%.

“Economic growth is the best response to contain the increase in defaults,” adds Roberto Vertamatti, director of the National Association of Executives in Finance, Administration and Accounting (Anefac).

long term trend

The economist from Serasa Experian believes that the long-term trend is an increase in household debt. In April, the total amount owed was 58.53% of annual income, the highest index since the start of the historic series, which began in 2005.

“This ratio is still low in Brazil. In other regional economies, like Chile, it is 80% and in the United States it is over 100%, ”he says.

He estimates that in the next ten years the ratio between household credit and their annual income could exceed 70%, drawn by lines of credit for the purchase of vehicles and real estate and by the aging of the population, which can promote the expansion of payday loans. .

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