Itaú BBA - MEXICO – Retail sales recovered in 3Q20

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MEXICO – Retail sales recovered in 3Q20

November 25, 2020

Still retail sales remain below pre-outbreak levels.

Retail sales recovered in 3Q20 amid the easing of distancing measures.  Retail sales fell by 7.1% year-over-year in September, worse than our forecast of -6.3% but better than market expectations of -8.7% (as per Bloomberg). According to figures adjusted by working days reported by the statistics institute (INEGI), retail sales contracted at a faster pace (-7.7%), taking the quarterly annual rate to -10.1% in 3Q20 (from -21.4% in 2Q20). Meanwhile, private consumption key determinant, the real wage bill, slowed down to -1.5% year-over-year in 3Q20 (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 -9.5 year-over-year in the 3Q20 (from -4.2% in 2Q20). In contrast, remittances converted to pesos posted a solid quarterly annual growth rate of 23.8% in 3Q20.

Still retail sales remain below pre-outbreak levels (February). Using seasonally adjusted figures, retail sales expanded for the fifth consecutive month, by 2.7% month-over-month in September, but it stood 6.2% below February levels. The quarter-over-quarter seasonally adjusted annualized rate (qoq/saar) stood at 71.0% in 3Q20 (from -59.7% 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. A more gradual than-expected reopening of the economy, due to the resurgence of the outbreak, is also a downside risk to private consumption.

Julio Ruiz

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