Brazilian consumer optimism rebounds in line with economic growth

Optimism in Brazil rebounded, with 38 percent of consumers in our research expressing confidence in the country’s economic conditions, compared with 33 percent in the second quarter. Notably, the share of consumers with mixed feelings about the economy has fluctuated as the percentage of those pessimistic about the economy has remained stable throughout 2024, hovering between 18 and 20 percent. While high-income consumers drove this optimism—44 percent feel positive about the economy—that figure was down from 52 percent late last year, reflecting the generally lower rate of optimism relative to most of 2023. The findings also show significant generational differences, with Gen Z notably less optimistic than older peers, which is unsurprising given the high youth unemployment rate.¹Baby boomers were born between 1946 and 1964; Generation X between 1965 and 1980; millennials in the 1980s and 1990s; and Gen Z between 1997 and 2012. “Brazil: Unemployment rate from 1999 to 2023,” Statista, July 5, 2024. Inflation remains a primary concern, with 50 percent of respondents citing rising prices as a top issue, compared with 43 percent in the June quarter. Younger generations are markedly less optimistic, given their lack of experience with the hyperinflation of the 1980s and 1990s, making current inflationary pressures more impactful.

The rebound in economic optimism is translating into increased intent to spend. Brazil’s consumers are planning to spend more on a range of essential, semidiscretionary, and discretionary items relative to the previous quarter, with some notable categories experiencing significant shifts, including jewelry, meals at sit-down restaurants, furniture, and toys. Intent to spend varies among age groups. Gen Z consumers plan to spend more on fitness and furniture; millennials on cruises, home improvement, and toys; and baby boomers on wellness products. Despite relatively stable spending intentions this year, overall consumption is exceeding market expectations and fueling GDP growth.

The number of consumers switching to cheaper products in the past three months has increased by seven percentage points year over year to 31 percent, continuing a consistent trend toward trading down. More medium- and high-income respondents reported delaying purchases compared with the second quarter, while fewer low-income consumers did so. This is likely because low-income consumers can’t deprioritize essential items, which consume most of their disposable income, while medium- and high-income consumers can afford to postpone purchasing nonessential splurge items. Baby boomers are adjusting their behavior more than any other age group, with 94 percent trading down compared with 84 percent in the three months ending in June. The percentage of baby boomers changing brands or delaying purchases has increased by double digits. Conversely, far fewer Generation X consumers are delaying purchases, adjusting quantities or pack sizes, or changing retailers. Notably, approximately one-third of respondents reported using “buy now, pay later” services—roughly double the rate observed in the United States, Mexico, and the five biggest European economies. Buy now, pay later is a popular payment method in Brazil, where the digitalization of payments has facilitated its growth.

Despite general optimism about the state of Brazil’s economy, the number of baby boomers planning to splurge in the next three months dropped significantly, from 38 percent to 29 percent. By contrast, a generation both pessimistic about the economy and more likely to belong to a lower income group—Generation Z—indicated an intention to splurge. Overall, 54 percent of Gen Z consumers planned to treat themselves this year, up from 49 percent in the second quarter.

While rebounding consumer optimism is not translating into general plans to splurge—as evidenced by a decline in the number of consumers intending to spend on top categories such as apparel, footwear, groceries, beauty and personal care, and out-of-home entertainment—there are generational differences. Millennials show an increased inclination to splurge in nearly all categories except beauty and personal care products, while Generation X appears to be shifting its splurge purchases from footwear and beauty products to restaurants and entertainment away from home. Last, more high-income respondents plan to splurge compared with the previous quarter, while medium- and low-income consumers cut back on discretionary spending. An exception is dining out, where more plan to splurge during the next three months.