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Markets & trends

Brazil: Cosmetics industry records the first decline in sales in over 20 years

2015 was not looking like a promising year. High inflation and an unstable political environment, in addition to the new law surrounding the tax on manufactured goods (IPI), an unfavorable exchange rate, and low confidence levels in global financial markets have led Brazil to record two consecutive GDP drops. According to data from the Brazilian Institute of Geography and Statistics, the economy shrank by 0.7% in the first quarter of 2015 – the worst start of the year since 1996 – followed by a 1.9% decline in the second quarter.

A decrease in workers’ income and a rise in the unemployment rate, which reached 7.5% in July, are among the consequences of recession. Both have a direct impact on purchase intention, which fell for the seventh consecutive time and reached the record low of 81.8 in August, a 32.3% decline compared to the same period in 2014. For the Brazilian Trade Confederation, any index below 100 indicates customer dissatisfaction.

Not even the beauty and personal care industry emerged unscathed – it registered its first drop in 23 years. Data from the Brazilian Association of Cosmetics (ABIHPEC) shows that between January and April 2015 the industry was down 2.5%.

Accounting for 1.8% of Brazil’s GDP and recording an average growth of 10%, the beauty sector had made it through previous economic downturns thanks to the so-called "lipstick effect", a phenomenon where sales of beauty products increase in times of recession, in contrast to the reduction in purchases for durable goods. Consumers are believed to invest more in beauty products to boost their appearance and self-esteem and eventually improve their chances in the competitive job market.

Studies carried out by ABIHPEC estimate an average decrease of 7% in sales volume this year, reaching up to 17% on some items.

© 2015 - Brazil Beauty News - www.brazilbeautynews.com

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