Itaú BBA - MEXICO – Retail sales recovered further in July

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MEXICO – Retail sales recovered further in July

September 23, 2020

Still, retail sales are 12% below pre-outbreak levels

Retail sales recovered in July, supported by the easing of social distancing measures. Retail sales fell by 12.5% year-over-year in July, worse than our forecast of -11.0% and market expectations of -12% (as per Bloomberg). According to figures adjusted by working days reported by the statistics institute (INEGI), retail sales contracted at a similar pace (12.7%), taking the quarterly annual rate to -17.7% in July (from -21.3% in 2Q20). Meanwhile, the main private consumption determinants remained weak in July. The real wage bill slowed down to -0.2% year-over-year in the quarter ended in July (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 contracted 6.5% year-over-year in the quarter ended in July (from -4.2% in 2Q20). In contrast, remittances in pesos posted a solid quarterly annual growth rate of 26.9% in July.

At the margin, retail sales also recovered. Using seasonally adjusted figures, retail sales expanded for the third consecutive month by 5.5% month-over-month in July (from 7.8% in June and 0.8% in May), but it is still 12% below pre-outbreak levels (February). The quarter-over-quarter seasonally adjusted annualized rate (qoq/saar) remained weak, standing at -33.8% in July (from -60.5% 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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