MexECON Blog

December Retail Sales Plunge 3.7 Percent

Mexican retail sales plunged by a seasonally-adjusted 3.7% in December, easily erasing the revised November gain of 0.7%.  Without seasonal adjustments, but stripping out price changes, sales in December were down 1.8% from the same month one year earlier.  That marked the first year-over-year decline in Mexican retail sales since early 2010.  The retail subsectors posting the worst year-over-year declines in December were those associated with interior décor, domestic appliances, and computers; recreational, paper, and personal products; motor vehicles, fuels, and lubricants; metal and glass products; food and beverages; and clothing and footwear.  The only retail subsectors to show a sales increase from the previous year were department stores and healthcare.

At the wholesale level, sales fell 1.4% in December, matching the decline in November and marking the fourth straight monthly decrease.  December's wholesale receipts were down a sharp 8.8% from the same month one year earlier.

The report was released today by INEGI, the official statistics agency.

Comment:  Mexican retail sales were boosted in November by the start of the second annual "El Buen Fin" program of year-end promotions.  Some of the sales decline in December was probably just a normal give-back after that.  Some of the December decline could also reflect consumer worries about the U.S. "fiscal cliff" and its potential impact on Mexico going forward.  Now that some of the cliff's worst tax hikes and spending cuts have been averted, Mexican consumers may breathe a sigh of relief and increase their spending again.  Nevertheless, the scale of the December decline and the fourth straight decrease in wholesale activity together suggest that underlying consumer demand may really be weakening substantially.  When the November sales report came out last month, I said Mexican wholesalers were probably letting their inventories get too low and would have to boost orders to their suppliers as retail sales continued to grow.  It now appears that hypothesis might not be correct.  Weaker activity in the construction and mining sectors, a modest uptick in unemployment, and now a significant decline in consumer demand all seem to underline the fact that Mexico's extraordinarily strong expansion of the last few years has started to wane.  Even if there is a modest near-term rebound in early 2013, it is clear that the economy is now in a phase of more moderate growth, mixed performance, and greater downside risks.

Patrick Fearon, CFA
Vice President, Fund Management

                                               Mexican Retail Sales
                                        Seasonally Adjusted, 2003 = 100
                                                  Source:  INEGI
Retail Sales 1212

                                            Mexican Wholesale Sales
                                        Seasonally Adjusted, 2003 = 100
                                                     Source:  INEGI
Wholesale Sales 1212

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