Itaú BBA - MEXICO – Weak consumption in December

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MEXICO – Weak consumption in December

February 26, 2019

Weakness in retail sales is partly due to the recent moderation in labor market indicators

Retail sales annual growth rate was substantially below market expectations. Retails sales fell by 1.3% year-over-year in December (from 3.4% in November), below our forecast (3.3%) and median market expectations (2.7%). The results could have been influenced by gasoline shortages (started the last week of December in some states of Mexico), which in turn is reflected in headline retail sales directly due to lower gasoline sales and indirectly as access to stores become more difficult. Moreover, the result is consistent with the weak monthly GDP proxy from December (0.04% year-over-year, from 1.8% in November), in particular the services index, which posted a growth rate of 1.0% year-over-year in December (from 3.1% in November). According to calendar-adjusted data reported by the statistics institute (INEGI), retail sales decreased 1.0% year-over-year in December (from 3.2% in November), taking the 4Q18 growth rate to 1.3% year-over-year (from 4.2% in the 3Q18).

At the margin, retail sales weakened sharply in the 4Q18. Using seasonally-adjusted figures, retail sales decreased 3.2% month-over-month in December (from 0.3% in November), taking the quarter-over-quarter annualized growth rate to -7.4% in the 4Q18 (from 2.8% in the 3Q18).

Weakness in retail sales is partly due to recent moderation in the growth rate of labor market indicators. Using seasonally adjusted figures, formal job creation decelerated in the 4Q18, posting a quarter-over-quarter annualized growth rate of 2.6% (from 3.4% in the 3Q18). Although the real wage bill accelerated to 2.6% in the 4Q18, from 1.8% in the 3Q18, growth during the second half of the year was below the full-year 2018 growth rate of 4.9%.

We expect private consumption growth rate moderate its pace in 2019 (relative to 2018), as the U.S. deceleration and uncertainties facing the economy curb GDP growth, although we acknowledge that one-off factors were partly behind the weakness in December’s consumption and will likely affect numbers for early 2019.   

Julio Ruiz


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