Itaú BBA - MEXICO – Retail sales momentum remained soft in February

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MEXICO – Retail sales momentum remained soft in February

abril 25, 2019

Higher real wages are a buffer for private consumption

Retail sales surprised to the upside, but grew at a below trend pace. Retails sales increased 1.8% year-over-year in February (from 0.9% in January); the figure was above our forecast and market expectations as per Bloomberg (0.6%). Although retail sales accelerated in February (compared to last month), it grew at a below trend pace (from an average growth of 2.4% in 2018). According to calendar-adjusted data reported by the statistics institute (INEGI), retail sales grew at a similar pace, taking the three month moving average growth rate to 0.5% (from 1.1% in January).

At the margin, retail sales momentum remained weak. Using seasonally-adjusted figures, retail sales increased 1.2% month-over-month in February (from 2.7% in January). Still the quarter-over-quarter annualized growth rate was -6.1% (from -6.7% in January). The results could have been influenced by gasoline shortages (started the last week of December in some states of Mexico and ended in February), which in turn is reflected in headline retail sales directly due to lower gasoline sales and indirectly as access to stores become more difficult.

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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