Retail sales growth in Brazil slowed to a halt in July as a tax hike hit fuel sales, suggesting a recent pickup in consumer spending may be more uneven than previously expected. Sales volumes excluding cars and building materials were flat from the previous month after seasonal adjustments, government statistics agency IBGE said on Tuesday.

Economists had expected retail sales to increase 0.1 percent in July, according to the median forecast in a Reuters poll. Monthly growth in June was revised to 0.9 percent, down from 1.2 percent reported previously. Fuel and lubricant sales were the biggest drag in July, falling 1.6 percent, hurt by a mid-month tax hike on gasoline, diesel and ethanol. Vehicle sales, which are included in a broader measure of retail sales, slipped 0.8 percent.

The July data snapped a string of stronger-than-expected economic figures fueling optimism about Brazil's recovery from its deepest recession in more than a century. Household spending lifted second-quarter gross domestic product (GDP) growth above analyst expectations, leading forecasters to raise their estimates for economic expansion in 2017. A sharp slowdown in inflation has boosted consumers' purchasing power and allowed the central bank to cut interest rates to a four-year low. In a report, economists at JPMorgan Securities said consumer spending should continue to recover in coming months despite the weaker-than-expected July retail figures.

Copyright Reuters, 2017