Itaú BBA - MEXICO – Monthly proxy for private consumption slowed down in 3Q17, but kept growing at a robust pac

Macro Latam

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MEXICO – Monthly proxy for private consumption slowed down in 3Q17, but kept growing at a robust pac

Dezembro 6, 2017

The real wage bill is accelerating at the margin

Private consumption slowed down in 3Q17, but still expanded at a solid pace. Tellingly, the print for September was quite strong, in spite of the natural hazards (which led many retail businesses in the affected states to shut down their doors for a few days). The monthly proxy for private consumption grew 3% year-over-year in September, which implies a growth rate of 3% in 3Q17 (from 3.2% in 2Q17). According to calendar-adjusted data reported by the statistics institute, growth was a bit higher in September (3.5% year-over-year) and 3Q17 (3.2% year-over-year, from 4.1% in 2Q17), compared to the headline numbers, but the slowdown was more pronounced with respect to the previous quarter. During 3Q17, lower real wage growth (on a year-over-year basis), less dyna mic cons umer credit, and softer remittances converted into pesos were drags on consumption.


At the margin, private consumption also lost traction in 3Q17. The monthly proxy for private consumption advanced 0.8% month-over-month in September, but quarter-over-quarter annualized growth decreased to 3.4% (from 4.4% qoq/saar in 2Q17). Looking at the breakdown, the consumption of national goods & services slowed down to 3.6% qoq/saar in 3Q17 (from 4.1% in 2Q17), with a deterioration of the services component (2.3% qoq/saar, 5.5% previously) partly offset by a rebound of the goods component (4.4% qoq/saar, 1% previously). Moreover, the consumption of imported goods weakened meaningfully (-0.9% qoq/saar in 3Q17, from 15.4% qoq/saar in 2Q17).

We expect consumption to continue growing at a solid pace in coming quarters. On a sequential basis, there is an improvement of the real wage bill (as highlighted in the chart above). Moreover, consumer confidence has shown a sustained improvement (seasonally-adjusted up by 1% month-over-month and 5.6% year-over-year in November, after hitting an all-time low in January). Also, remittances are improving on the back of a solid U.S. economy. On the negative side, consumer credit will likely continue slowing down (4% year-over-year in October, from 4.5% in September and 11.8% at the beginning of the year), due to higher domestic interest rates.


Alexander Müller

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