Itaú BBA - Evening Edition – Retail sales decelerate in Mexico

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Evening Edition – Retail sales decelerate in Mexico

May 22, 2019

Using calendar-adjusted data, retail sales grew at a slower pace in March.

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Retails sales grew 1.6% year-over-year in March (from 2.5% in the previous month), below our forecast (2.3%) and the median of market expectations (1.8%). The figure was boosted by a positive calendar effect due to the Easter Holidays. In fact, according to calendar-adjusted data reported by the statistics institute (INEGI), retail sales grew at a slower pace (0.8% year-over-year in March, from 2.5% in February), taking the 1Q19 growth rate to 1.2% (from 1.7% in 4Q18). At the margin, retail sales improved somewhat in 1Q19, supported by the real wage bill. Using seasonally-adjusted figures, retail sales fell by 0.2% mom (from 1.1% in February), taking the quarter-over-quarter annualized growth rate to 1.7% in 1Q19 (from -0.8% in 4Q18). We expect private consumption to moderate its pace in 2019 (relative to the previous year), as the U.S. deceleration and uncertainties facing the economy curb GDP growth. However, recent real wage increases are a buffer for activity. Lower inflation and minimum wage increases, amid a still-tight output gap, are the factors boosting real wages.
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Tomorrow’s Agenda: At 10:00 AM, INEGI will publish CPI inflation figures for the first half of May. We expect bi-weekly CPI to fall by 0.30% (from -0.29% a year ago), leading the year-over-year rate to 4.43% (from 4.44% in the second half of April). 


According to think-tank Fedesarrollo, both industrial and retail confidence remained upbeat in April. Industrial confidence was 4.4% in April (0 = neutral), up from 2.0% one year earlier and 3.0% in March. The improvement from April 2018 was mainly explained by a less disappointing evaluation of current order volumes (-14.4% vs. -22.4% one year ago), while expectations for production in the upcoming quarter ticked up to 32.2%. On the other hand, retail confidence stayed elevated at 29.7%, compared to 28.7% one year ago (27.5% in March). The improvement from last year was explained by better expectations of the economic situation in the coming semester (from 47.5% to 49.7%) and the evaluation of the current situation (from 39.6% to 44.0%). An expansionary monetary policy alongside low inflation and a weaker Colombian peso (referred to by respondents at the principal factor that positively affected exports in first quarter) would likely keep the business sector confident that improving activity momentum continues. Nevertheless, we note that weaker than expected 1Q19 GDP growth shows signs that the impact of weakening global growth could be filtering through to the Colombian economy, and raises downside risks to our 3.1% forecast for this year (2.6% in 2018).


Tomorrow’s Agenda: FGV’s consumer confidence index for May will be released at 8:00 AM.


Tomorrow’s Agenda: The trade balance for April will be released. We forecast a surplus of USD 900 million in the month (versus a USD 1300 million deficit registered in the same month of 2018).

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