MexECON Blog

December Retail Sales Drop 2.6 Percent

Mexico's December retail sales dropped by a seasonally-adjusted 2.6%, erasing much of their revised 3.5% gain in November.  Without seasonal adjustments, but stripping out the impact of price increases, December's sales were up 3.5% from the same month one year earlier.  The retail subsectors posting year-over-year increases in December included paper and personal products; department stores; healthcare; metal and glass products; motor vehicles, fuels, and lubricants; and others.  The only subsector to post a year-over-year sales decline was domestic appliances, computers, and interior decorating goods.  The report was released today by INEGI, the official statistics agency.

Comment:  In spite of the decline in December, retail sales in Mexico continue to trend higher.  For full-year 2011, sales rose by an inflation-adjusted 3.5%, matching the December pace.  Mexican consumer spending is rising in large part because of a gradual decline in unemployment.  I also suspect the fall in the value of the peso since last summer has helped out by boosting the impact of two key financial flows into Mexico:  remittances sent by family members working in the United States, and the repatriation of U.S. profits by drug cartels.  Of course, the mass emigration of Mexican workers is a symptom of the country's remaining economic challenges, and violent drug cartels are a threat to the economy.  Nevertheless, every dollar that enters Mexico from these sources now buys many more pesos than in the recent past, providing added economic stimulus.  The weak peso means businesses face higher costs for imported goods, and when they eventually try to pass those added costs on to consumers, consumption spending will probably suffer.  However, that process has only begun recently.  

Patrick Fearon, CFA
Vice President, Fund Management

                                                    Mexican Retail Sales
                                          Seasonally Adjusted, 2003 = 100
                                                         Source:  INEGI
Retail Sales 1112

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