Macro Analysis /

Mexico: Retail sales extend losses in September amid a more challenging backdrop

  • Retail sales fell 0.2% m/m (3.3% y/y), as price pressures continued impacting real wages

  • Most sectors were negative, highlighting -2.0% in both appliances & computers and glass & hardware

  • We expect sales to accelerate in 4Q22, with fundamentals remaining as the main support for household consumption

Juan Carlos Alderete Macal
Juan Carlos Alderete Macal

Director of Economic Research

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

22 November 2022
Published byBanorte
  • Retail sales (September): 3.3% y/y; Banorte: 3.9%; consensus: 3.9% (range: 2.5% to 4.6%); previous: 4.7% 

  • Retail sales fell 0.2% m/m, extending the 0.1% decline of the previous month. We believe that performance continues to be limited by price pressures. Nevertheless, we cannot rule out that consumers postponed their spending to 4Q22 

  • Inside, dynamics were skewed to the downside. We highlight declines in appliances and computers (-2.0%), as well as glass and hardware (-2.0%). Internet sales rebounded sharply (5.3%), partly due to a positive base effect 

  • Headwinds prevail in the short-term –mainly inflationary pressures, impacting real wages–, although fundamentals should continue supporting household consumption

Retail sales keep moderating in annual terms. These increased 3.3% y/y, lower than consensus and our estimate at 3.9%. Figures continue to unwind as base effects normalized further. This situation has been seen in the deceleration of the last couple of months. We highlight a relatively positive behavior of fundamentals despite persisting headwinds. Regarding this last point, the main factor would be inflation, which despite being unchanged at 8.70% y/y (for the headline), the core accelerated to 8.28% from 8.05%. In addition, real wages remain under pressure, albeit with marginal relief given an increase in average wages in nominal terms. On a positive note, we had a slight improvement in consumer confidence during the period after four months lower. Regarding fundamentals, we note: (1) Some losses in the labor market, but with overall signs still positive; (2) strength in remittances; and (3) an additional expansion in consumer loans.

Additional drop in September sales. Retail sales fell 0.2% m/m, extending the -0.1% of the previous month. Although not favorable, it does not come entirely as a surprise, with timely data consistent with the sequential result. ANTAD sales fell, with same-stores down 0.5% y/y in real terms, while IMEF’s non-manufacturing indicator slowed down for a second consecutive month.

Inside, five of the nine subsectors dropped, with dynamics still influenced by base effects. The most relevant setbacks were in appliances and computers (-2.0%), as well as glass and hardware (-2.0%), with the result possibly from consumers deciding to postpone purchases towards late in 4Q22 to take advantage of discounts. On the other hand, the main increases were in internet sales (5.3%) and supermarket and departmental stores (1.3%). The former likely corresponds to a rebound after falling 13.0% in the previous month. On the latter, the increase was driven by departmental (4.8%), albeit with supermarkets also positive (0.9%). Lastly, we highlight that vehicles and fuel sales fell 1.4%, with vehicles at -2.9% –in line with AMIA figures–, and fuel sales at 0.0%, –matching Pemex’s data.

We anticipate a recovery in sales during the last quarter of the year. Today’s results are consistent with signs of a consumption slowdown during 3Q22. Despite of the latter, we believe conditions are favorable for retail sales to regain dynamism at the end of the year. In this regard, we identify three key factors: (1) Solid fundamentals; (2) households that have postponed purchases to benefit from better prices during discounts and special sales at the end of the year; and (3) a stronger Mexican peso that favors the consumption of imported goods, a trend that began at the end of the third quarter. As such, timely data shows encouraging signs. October’s ANTAD sales returned to positive territory, with same-stores at +1.5% y/y in real terms (previous: -0.5%), and total-stores at +3.7% (previous: +1.7%). Regarding inflation, the headline kept moderating (from 8.64% to 8.53%), although with pressures on the core continuing. On the other hand, vehicle sales rebounded 0.7% m/m (using our in-house seasonal adjustment model) according to AMIA. Finally, INEGI’s Timely Indicator of Economic Activity also flags more dynamism, with services resilient at 0.1% m/m. Considering the latter, we maintain our view that domestic demand will keep boosting activity towards the end of 2022, despite price pressures.

Finally, we believe that ‘El Buen Fin’ (Mexico’s Black Friday) will be the main boost for the period; currently being the most important weekend nationwide for retail sales, with higher sales in clothing, shoes, TVs, computers, and smartphones. Héctor Tejada, president of the National Chamber of Commerce, Services and Tourism (Concanaco Servytur in Spanish), points out that the economic benefit of this edition is estimated at $195 billion. Moreover, we expect an additional positive spillover from the 2022 FIFA World Cup, with the event usually helping TV sales, as well as consumption in restaurants and bars.