Itaú BBA - MEXICO – On an annual basis, retail sales moderated its pace in 1Q19

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MEXICO – On an annual basis, retail sales moderated its pace in 1Q19

mayo 22, 2019

higher real wages are a buffer for private consumption

On an annual basis, retail sales moderated its pace in 1Q19. Retails sales grew 1.6% year-over-year in March (from 2.5% in February); the figure was below our forecast (2.3%) and market expectations as per Bloomberg (1.8%). The figure was boosted by a positive calendar effect (Easter Holidays). In fact, according to calendar-adjusted data reported by the statistics institute (INEGI), retail sales grew at a slower pace (0.8% year-over-year in March, from 2.5% in February), taking the 1Q19 growth rate to 1.2% (from 1.7% in 4Q18).

At the margin, retail sales improved somewhat in 1Q19, supported by the real wage bill. Using seasonally-adjusted figures, retail sales fell by 0.2% (from 1.1% in February), taking the quarter-over-quarter annualized growth rate to 1.7% in 1Q19 (from -0.8% in 4Q18). The acceleration in the real wage bill growth rate (12.4% in 1Q19, from 2.6% in 4Q18), in a context of employment weakening (formal employment: 1.9% in 1Q19, from 2.6% in 4Q18), is supporting private consumption.

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. Lower inflation and minimum wage increases, amid a still-tight output gap, are the factors boosting real wages.


Julio Ruiz
 



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