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Private consumption determinants are still supportive

Julio Ruiz


Retail sales grew 3.8% yoy in October (from 3.3% in September), above our forecast of 2.6% and market consensus of 3.6% (as per Bloomberg). According to figures adjusted by working days reported by the statistics institute (INEGI), retail sales expanded at a faster pace than the headline figure (3.9%), taking the quarterly annual rate to 3.7% (from 4.3% in 3Q22). The key determinant of private consumption, the real wage bill growth, stood at a still decent 6.6% yoy in quarter ended in October (from 6.7% in 3Q22), with formal employment growing 4.0% (from 3.9%), while nominal wages increased 11.3% (from 11.4%). In turn, the quarterly annual growth rate of consumption credit from commercial banks in real terms stood at 6.9% yoy in October (from 6.0% in 3Q22), while remittances converted to pesos grew at 10.2% (from 14.0%).

Retail sales momentum is softer, but still positive. Using seasonally adjusted figures, retail sales grew 0.7% mom in October, taking quarter-over-quarter seasonally adjusted annualized rate (qoq/saar) to 1.2% in October (from 1.0% in 3Q22 and 3.6% in 2Q22).

Solid activity is unlikely to last in the last quarter of this year and 2023 amid a softer global outlook. We expect GDP growth of 2.9% and 1.3% for 2022 and 2023, respectively.

Julio Ruiz