MexECON Blog

July Retail Sales Fall Sharply

Mexican retail sales dropped by a seasonally-adjusted 1.4% in July, marking their sharpest decline since last December.  However, the big fall in July came after an outsized gain of 1.8% in June.  Without seasonal adjustments, but stripping out price changes, sales in July were still up 2.6% from the same month one year earlier.  The retail subsectors posting the best year-over-year increases in July were domestic appliances and computers; motor vehicles, fuels, and lubricants; metal and glass products; healthcare; and clothing and footwear.  The only retail subsector to post a year-over-year decline was department stores.  The report was released today by INEGI, the official statistics agency.

Comment:  The big drop in sales during July should not be considered alarming.  Because the rise in sales during June was so extraordinarily strong, it should be no surprise that sales came back down to earth in July.  In addition, declining unemployment and a big increase in consumer confidence during July help provide reassurance that Mexican consumption demand is likely to remain on an upward trend.  It is true that a severe worsening in the European debt crisis could undermine global confidence and throw Mexico's economy backwards, and, in any case, slowing economic growth around the world will probably start to weigh on Mexican activity soon.  However, the most likely scenario in the near term is for the Mexican economy to keep growing well on the strength of rising exports and increased domestic demand.

Patrick Fearon, CFA
Vice President, Fund Management

                                                Mexican Retail Sales
                                        Seasonally Adjusted, 2003 = 100
                                                    Source:  INEGI
Retail Sales 1207 B

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