Itaú BBA - MEXICO – Retail sales recovered further in August

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MEXICO – Retail sales recovered further in August

October 23, 2020

The easing of distancing measures supported the recovery

The easing of social distancing measures supported a sequential recovery of retail sales in August, but the level of sales remain far below pre-pandemic’s . Retail sales fell by 10.8% year-over-year in August, worse than our forecast of -9.1% and market expectations of -9.7% (as per Bloomberg). According to figures adjusted by working days reported by the statistics institute (INEGI), retail sales contracted at a similar pace (10.0%), taking the quarterly annual rate to -13.2% in August (from -21.3% in 2Q20). Meanwhile, private consumption key determinant, the real wage bill, slowed down to -1.2% year-over-year in the quarter ended in August (from 1.5% in 2Q20), with formal employment falling by 4.2% (from -3.5%). In turn, consumption credit from commercial banks in real terms deteriorated further to -8.3 year-over-year in the quarter ended in August (from -4.2% in 2Q20). In contrast, remittances converted to pesos posted a solid quarterly annual growth rate of 23.9% in August.

At the margin, retail sales recovered in August, but at a slower pace than in the previous two months. Using seasonally adjusted figures, retail sales expanded for the fourth consecutive month by 2.5% month-over-month in August (from 5.9% and 7.6% in July and June, respectively), but it is still 9.3% below pre-outbreak levels (February). The quarter-over-quarter seasonally adjusted annualized rate (qoq/saar) stood at 14.7% in August (from -60.4% in 2Q20).

We expect private consumption to recover during the rest of the year as distancing measures are lifted. However, the recovery will likely be curbed by a shy fiscal stimulus and prevailing uncertainties over economic policy direction.

Julio Ruiz


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