MexECON Blog

July Retail Sales Rise 0.4 Percent

Mexico's July retail sales rose by a seasonally-adjusted 0.4%, after an upwardly revised increase of 0.9% in June.  That marked the first back-to-back sales gains in Mexico since summer 2010.  Without seasonal adjustments, but stripping out the impact of price increases, sales in July were up a moderate 3.1% from the same month one year earlier.  The retail subsectors posting year-over-year sales gains in July included paper products; department stores; healthcare; clothing and footwear; metal and glass products; and motor vehicles, fuels, and lubricants.  The report was released by INEGI, the official statistics agency.

Comment:  During late 2010 and early 2011, rising fuel and food costs forced many Mexican consumers to pull back on purchases, and a jump in unemployment during the spring put further downward pressure on demand.  Mexican retail sales were therefore choppy for several quarters, though the trend was upward.  The second straight monthly rise in retail sales during July probably stems in large part from retreating unemployment in that month.  Mexican exports are still rising at a good pace, industrial production and hiring are on the rise again, and domestic demand continues on an upward trajectory.  Nevertheless, slowing growth abroad is likely to present headwinds going forward and could even reverse those positive trends.    Reflecting the downside risks to Mexico, the International Monetary Fund (IMF) this week cut its projections for Mexican economic growth.  The IMF now believes Mexico's gross domestic product (GDP) will grow just 3.8% in 2011 and 3.6% in 2012.  Those growth rates are still above average for Mexico, but they are decidedly more subdued than the IMF's previous forecasts of 4.6% in 2011 and 4.0% in 2012.

Patrick Fearon, CFA
Vice President, Fund Management

                                                   Mexican Retail Sales
                                        Seasonally Adjusted, 2003 = 100
                                                       Source:  INEGI
Retail Sales 1107

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