The Economist – Mexico City
During the first half of this year, Key entities for the Mexican economy recorded declines in their retail sales, main indicator of private consumption.
According to data from the National Institute of Statistics and Geography (Inegi), Total revenue from the supply of goods and services in retail trade fell 0.05% annually nationwide in the first half of 2024.
Although only 11 of the country’s 32 entities showed contractions in their retail trade, the national decline – the first since 2020 – This resulted in key states for the economy experiencing declines in this indicator.
This situation raises red flags because entities relevant to the country’s economic activity They showed declines in a macroeconomic fundamental of the Gross Domestic Product (GDP).
“Consumption represents 68.6% of GDP, being the most important component. Its determinants are consumer confidence, changes in economic expectations, inflation, disposable personal income, credit granting and the interest rate,” details Banco Base.
For Ve por Más (BX+), the decline in commercial activity in June was accompanied by a marginal increase in the unemployment rate (2.7%), although it remained close to its historical low. Inflation also continued to undermine household purchasing power, accelerating to 4.98% annually, a 12-month high.
The above, he adds, overshadowed the improvement in consumer confidence. (47.4 points, the highest level since February 2021), and the rebound in remittances in pesos (19.0% annually).
Important territories
By state, Guerrero had the sharpest annual drop in retail sales in the first half of the year, 14.47%; like the rest of the entities, Household spending in Guerrero is being hampered by still high inflation and interest rates, in addition to the effects of Hurricane Otis on tourism, the state’s main economic activity.
The largest economies in the country also reduced their retail trade: Mexico City by 0.73% and State of Mexico by 2.85%, in whose commercial dynamics high inflation levels and the higher cost of consumer financing have a greater effect.
Meanwhile, most of the states on the country’s northern border, a relevant region for being a binational economy and which directly resents exchange rate volatility, showed a drop in the income of its retail establishments, such as Coahuila and Chihuahua.
Another key player in the Mexican economy, particularly in the tourism sector, saw a drop in its retail trade: Quintana Roo (0.55%).
At the other extreme, Hidalgo was the state that registered the greatest annual growth in business sales retail, 5.66%; the podium was completed by Aguascalientes (4.58%) and Querétaro (3.99%), located in the Bajío, an area where industrial dynamism has favored private consumption.
Few catalysts
In the second half of the year, BX+ expects that private consumption will continue to present challenges, which, he explains, would mean that household spending would become more defensive.
“High inflation will continue to restrict household purchasing power. Even if interest rates decline somewhat, they will still limit access to financing. In an environment of economic slowdown, we expect job creation to continue to slow, which in turn will affect consumer confidence,” the financial group anticipates.
He also said that growth in remittances would be limited due to the cooling of employment. in the United States, although its variation in pesos could be favored by the exchange rate depreciation.
For its part, in light of the reported data, Monex points out that the reading of deceleration and weakness in demand in the short term is intensifying, The general outlook is reversing and is showing greater signs of a pronounced cooling of consumption.
