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Private consumption main determinant, the real wage bill, remains resilient

Retail sales grew 3.4% yoy in February (from 5.3% in January), below our forecast of 4.5% and market consensus of 4.2% (as per Bloomberg). According to figures adjusted by working days reported by the statistics institute (INEGI), retail sales expanded at the same pace, taking the quarterly annual rate to 3.6% in February (from 2.9% in 4Q22). The key determinant of private consumption, the real wage bill growth, stood at a solid 6.7% yoy in the quarter ended in February (practically unchanged from 4Q22), with formal employment growing 3.5% (from 3.8%), while nominal wages increased 11.1% (from 11.0%).  In turn, the quarterly annual growth rate of consumption credit from commercial banks in real terms stood at a solid 9.3% yoy (from 8.8% in 4Q22), while remittances converted to pesos stood at 3.7% (from 3.5%). 


At the margin, retail sales deteriorated in February, but momentum remained positive. Using seasonally adjusted figures, retail sales fell by 0.3% mom (after growing at a strong 1.7% in January), taking quarter-over-quarter seasonally adjusted annualized rate (qoq/saar) to 6.0%  (from 2.6% in 4Q22).


Our GDP growth forecast for this year stands at 1.8%. In our view, the economy will cool down in the last three quarters of this year, due to a softer U.S. economy, after still-decent GDP growth in 1Q23.


Julio Ruiz