Itaú BBA - MEXICO – Retail sales surprised to the upside in May

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MEXICO – Retail sales surprised to the upside in May

julio 25, 2019

The real wage bill is a buffer for private consumption

Retail sales was above market expectations in May. Retails sales grew 2.8% year-over-year in May (from 1.6% in April), close to our forecast (2.6%) and above market expectations as per Bloomberg (1.4%). According to calendar-adjusted data, reported by the statistics institute (INEGI), retail sales grew at a similar rate, taking the quarterly growth rate to 2.0% in May (from 1.9% in April).

At the margin, retail sales also improved, supported by the real wage bill. Using seasonally-adjusted figures, retail sales accelerated to 0.7% month-over-month in May (from 0.9% in April), taking the qoq/saar to 7.8% in May (from 5.6% in April). The solid growth of the real wage bill (6.8% qoq/saar in May) - although in a context of weakening employment (formal employment: 1.6% qoq/saar in May) - 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, the expectation of lower inflation and recent minimum wage increases support real wages, providing support for consumption. 

Julio Ruiz

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