MexECON Blog

July Retail Sales Rise 0.6 Percent

Mexican retail sales rose by a seasonally-adjusted 0.6% in July, after increases of 0.1% in June and 0.7% in May.  That marked the first time Mexican retail sales have risen for three straight months since late 2011.  Nevertheless, sales on an unadjusted, constant-price basis were up just 1.3% from the same month one year earlier.  The retail subsectors posting year-over-year increases in July were motor vehicles, fuels, and lubricants; clothing, footwear, and textile goods; healthcare; metal and glass products; and recreational, paper, and personal products.  The retail subsectors posting a year-over-year decline in sales were furniture, domestic appliances, and computers; food and beverages; and department stores.

At the wholesale level, July sales rose 1.6%, after revised increases of 0.8% in June and 0.3% in May.  Nevertheless, wholesale receipts in July were down 1.4% year-over-year.

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

Comment:  The improvement in Mexican retail activity partly reflects slightly stronger hiring over the last few months.  A report Friday showed Mexico's unemployment rate fell to 4.8% in August after being stuck for several months at about 5.0%.  Just as important, the rebound also reflects cooler inflation.  Food prices have moderated considerably, leaving many consumers with more to spend on other goods and services.  Any sustained strengthening in the retail sector would be especially important because falling consumption was the key reason for the Mexican economy's contraction in the second quarter.  With exports weak, government spending tight, and construction activity falling, the economy is in clear danger of contracting again in the third quarter and thereby meeting the customary definition of a recession.  The rebound in retail activity is perhaps Mexico's best hope for avoiding that fate.  At this point, it still looks like the Mexican economy is moving in the direction of a recession, but the improvement in retail sales serves as a reminder that a recession is still not yet set in stone, and even if it happens, the contraction would probably be short and shallow.

Patrick Fearon, CFA
Vice President, Fund Management

                                                  Mexican Retail Sales
                                          Seasonally Adjusted, 2003 = 100
                                                    Source:  INEGI
Retail Sales 1307

                                              Mexican Wholesale Sales
                                          Seasonally Adjusted, 2003 = 100
                                                    Source:  INEGI
Wholesale Sales 1307

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