Itaú BBA - MEXICO – Retail sales deteriorated in March

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MEXICO – Retail sales deteriorated in March

Maio 22, 2020

Already weak retail sales started reflecting the negative effects from COVID-19

Retail sales and most of its determinants deteriorated in 1Q20 amid the beginning of social distancing measures to contain the coronavirus outbreak in March. Retails sales contracted 1.3% year-over-year in March, below our forecast (0.4%) and market expectations as per Bloomberg of -1.0%. According to figures adjusted by working days, reported by the statistics institute (INEGI), retail sales contracted at a slightly lower pace (-1.1%, from -0.5%), taking the 1Q20 annual rate to 0.3% (from 2.0% in 4Q19). The real wage bill, the main private consumption determinant decelerated  in 1Q20 (4.4% year-over-year, from 5.3% in 4Q19), with formal employment deteriorating (1.3%, from 1.7%). Likewise, consumption credit from commercial banks in real terms slowed down to 0.9% in 1Q20 (from 2.8% in 4Q19). In contrast, remittances in pesos accelerated sharply 26.3% in 1Q20 (from -1.6% 4Q19), as the Mexican peso weakened.

At the margin, retail sales also deteriorated. Using seasonally-adjusted figures, retail sales contracted 0.8% month-over-month in March (from -1.0% in February), taking the quarter-over-quarter annualized rate (qoq/saar) to -2.6% in 1Q20 (from -2.7% in 4Q19).

We expect private consumption to deteriorate sharply in the first half of 2020 due to the negative impact from the coronavirus outbreak. While a recovery in the second half of the year is likely, consumption - and activity in general – will likely post a sharp contraction in the full-year 2020. 

Julio Ruiz

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