MEXICO – Retail sales expanded further in May

Large annual growth reflects a favorable base effect

Julio Ruiz


Retail sales’ annual growth is still reflecting a favorable base effect due to strict social distancing measures a year ago.  Retail sales grew 29.7% year over year in May (from 30.1% in April), below our forecast of 30.7% and above market expectations of 28.5% (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 19.0% in May (from -2.9% 1Q21). Meanwhile, private consumption key determinant, the real wage bill, stood at 1.2% year over year in the quarter ended in May (from 0.6% in 1Q21), with formal employment recovering to 0.4% (from -2.9%), while the average nominal wage growth stood at 6.4% (from 7.8%). In turn, consumption credit from commercial banks quarterly annual growth rate in real terms is still soft at -10.1% in May (from -13.2% in 1Q21). Finally, remittances converted to pesos grew at a still solid 6.7% in the quarter ended in May.  

At the margin, retail sales in May recovered further. Using seasonally adjusted figures, retail sales grew 0.6% month over month in May, taking the quarter over quarter seasonally adjusted annualized rate (qoq/saar) to 23.2% in May. 

We expect private consumption to recover during the rest of the year as social distancing measures are eased further. However, the recent resurgence in the outbreak is a downside risk to private consumption. For now, authorities have avoided stricter social distancing measures as new deaths and hospitalization/ICU capacity remain relatively contained.  

Julio Ruiz