Itaú BBA - MEXICO – Weak retails sales in January

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MEXICO – Weak retails sales in January

March 26, 2019

The deceleration of retail sales will be curbed by higher real wages

On an annual basis, retail sales expanded at a below trend pace in January. Retails sales increased 0.9% year-over-year in January (from -1.3% in December); the figure was above our forecast (-0.4%) and below median market expectations (1.1%, as per Bloomberg). Although retail sales accelerated in January (compared to last month), it grew at a below trend pace (from an average growth of 2.4% in 2018). 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. According to calendar-adjusted data reported by the statistics institute (INEGI), re tail sal es increased 1.1% year-over-year in January (from -1.0% in December), taking the three month moving average growth rate to 1.0% year-over-year in the quarter ended in January (from 1.3% in December).

At the margin, retail sales remained weak in the quarter ended in January. Using seasonally-adjusted figures, retail sales increased 1.9% month-over-month in January (from -3.2% in December), taking the quarter-over-quarter annualized growth rate to -7.4% in the quarter ended in January (from -7.3% in December).

 

We expect private consumption to moderate its pace in 2019 (relative to 2018), as the U.S. deceleration and uncertainties facing the economy curb GDP growth. In this context, employment is weakening. However, recent real wage increases are a buffer for activity. Recent figures continue to show an improvement in the real wage bill, which increased 8.1% qoq/saar in the quarter ended in February (from 4.8% in January), despite slowing job creation. Lower inflation and minimum wage increases, amid a still-tight output gap are the factors boosting real wages.


Julio Ruiz



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